Canadian Home Builders’ Association (CHBA) calls for policy adjustments to combat rising housing costs and dwindling supply
In the face of the most recent increase in interest rates, the Canadian Home Builders’ Association (CHBA) is urging the federal government to implement policies that mitigate the adverse effects of rising interest rates on housing affordability and availability.
Rising interest rates not only contribute to increased housing costs and inflation in the housing market but also have significant implications for slowing down housing supply, according to CHBA. The affordability of financing housing, both for ownership and rental, diminishes as interest rates rise, resulting in a decrease in the construction of all types of housing units. This mounting challenge affects both prospective homebuyers and renters, exacerbating the existing supply and demand imbalance and further eroding affordability.
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CHBA CEO Kevin Lee emphasizes the urgency for policy adjustments to support homebuyers and promote purpose-built rental construction. Lee states, “The federal government has stated we will need to double housing starts and build some 5.8 million new homes over the next decade to address the current housing supply crisis and address affordability. However, would-be buyers are continually finding themselves unable to afford purchasing a home, and renters are having challenges finding affordable rentals too, due to prolonged rate hikes, challenging mortgage rules, lack of supply, development taxes, and more – all of which are dramatically eroding affordability.”
Lee emphasizes the need for immediate policy changes to support the creation of housing supply, not only during the current period of high interest rates but also once interest rates return to more normal levels. He asserts that targeted measures must be taken to enable well-qualified first-time buyers to enter the market and help restore the housing supply. Lee proposes a return to 30-year amortizations on insured mortgages for qualified first-time buyers as a crucial tool to address the challenges Canadians face and encourage the construction of more housing.
To enhance housing affordability, CHBA recommends updating the thresholds for the GST New Housing Rebate, which have remained unchanged since 1991. “The $350,000 to $450,000 thresholds that were set for the rebate need to be at least doubled immediately, since most homes in major cities are priced well above that threshold. An increase in the thresholds for the rebate would have direct affordability benefits, especially for first-time buyers,” Lee says.
Changing the GST thresholds would support purpose-built rental as well, though CHBA has been advocating for completely zero-rating GST/HST on construction on purpose-built rental, or at least having its payment deferred until the sale of the building. This would help to make the construction of more purpose-built rental viable from a development perspective; tax treatment on purpose-built rental over the past three decades has contributed to a major shortage of rental units in Canada, particularly in our larger urban centres, according to CHBA.
CHBA also highlights the importance of increased investment in housing-enabling infrastructure by the federal government. This investment would accelerate development and help alleviate the exorbitant development charges imposed on new home construction. According to the Canadian Centre for Economic Analysis, government-imposed costs account for 31 percent of the total cost of a new home in Ontario, with municipal development taxes witnessing a staggering 700 percent increase over the past two decades.
In conclusion, CHBA CEO Kevin Lee emphasizes the need for a comprehensive approach to solving Canada’s housing supply and affordability crisis. Lee states, “It will take a comprehensive approach to solve Canada’s housing supply and affordability crisis; an approach that supports new homebuyers’ ability to access the market, enables investment in purpose-built rental, avoids adding new costs to housing of all types, and removes barriers to more housing supply that is desperately needed.”
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