A letter from the Federation of Canadian Municipalities cites the high cost of housing as the most urgent financial issue facing Canadians today. “Housing costs and, as the Bank of Canada notes, household debt, are undermining Canadians personal financial security, while putting our national economy at risk,” quotes the document addressed to Stephen Harper.
The letter was put forth by the Federation of Canadian Municipalities, who represent over 90% of Canada’s population. The letter goes on to point out that, “As it stands, for those who cannot afford to purchase a home, the short supply of rental units is driving up rental costs and making it hard to house workers in regions experiencing strong economic activity. One recommendation put forward by the Federation is for Canada Mortgage and Housing Corporation (CMHC) to back low-interest mortgages on older buildings to help pay for maintenance and other costs.
The macro economic picture is one of the rich getting richer and the poor getting poorer. This development is being aided by the tighter mortgage rules put in place by the Department of Finance. The goal of the tighter mortgage rules was to bring down housing prices and mortgage debt. There is no doubt that tighter mortgage rules have cooled the housing market, but what’s become painfully clear is that it’s had a massive impact on first time home-buyers and those in the rental market while having no impact on wealthier Canadians.
Much or our workforce no longer qualifies to buy a home due to the higher carrying costs imposed by our Department of Finance. It’s kept them out of the housing market, prevented them from carrying a mortgage and forced them into the rental market. The resulting surge in demand for rental units has caused a spike in rental rates. Either way these workers are facing higher housing costs.
While a lower debt burden is a worthy goal, the answer isn’t a carte blanche mortgage rule change that only hurts first time buyers and lower income Canadians. It’s time to find a solution that helps Canadians secure decent affordable housing. Limits can be put on jumbo mortgages and loans, but affordable housing for all should be a government priority.