Elections & The Canadian Housing Bubble
The Chinese Are Coming…
In 1966, Norman Jewison produced and directed a hilarious comedy: “The Russians Are Coming, the Russians Are Coming”. And in his movie, a truly great cast depicts the chaos following the grounding of the Soviet submarine off a small New England island.
The Canadian federal elections are upon us in 30 days. And if you simply replace the “Russians” with the “Chinese” — some of the press articles describing the Canadian housing bubble may serve as a script for a brand new 2021 movie. Too bad, that it’s not a comedy…
Suddenly, the housing bubble became one of the most fiercely debated issues by all federal politicians. And surprisingly, the vigor of the debates matches even the most heated healthcare issues linked to COVID-19.
And The Winner Is…
According to the recent CBC report: “Canadian voters will be hearing a similar message from each of the major federal parties during the current election campaign: housing has grown too expensive, and we have a plan to fix it.
Main federal parties all say they’ll make housing more affordable. The consensus reflects the increasingly dire state of housing in Canada, which affects everyone from prospective homeowners feeling squeezed out of the market to lower-income families languishing on waiting lists for affordable housing.
It doesn’t really matter where you fit on the housing spectrum, housing is in a state of crisis in this country — said Jeff Morrison, executive director of the Canadian Housing and Renewal Association”.
CBC: “What we know about the housing platforms”
Liberals
“The Liberals haven’t released their election platform yet, but we can glean some clues from the government’s 2021 budget, which doubles down on the government’s National Housing Strategy introduced in 2017.
The budget included a commitment of $2.5 billion to create 35,000 affordable housing units, $1.5 billion of which is dedicated to the government’s “rapid housing initiative,” which seeks to build new affordable housing units much faster than is typically possible. The Liberals also proposed a new tax targeting “underused” housing”.
Conservatives
“The Conservatives’ election platform features a plan to build one million homes over three years, the conversion of at least 15 per cent of federal government property into housing and the creation of an Indigenous housing strategy.
A Conservative government would also bar foreign investors who are not living or moving to Canada from buying a home for at least the next two years.
The party also wants to encourage the offering of seven-to-10-year mortgages and to make tweaks to stress test and insurance requirements to help people qualify more easily for financing”
NDP
“The NDP’s housing platform is centred on a proposal to build 500,000 affordable homes over the next 10 years. The party is also proposing a 20 per cent foreign buyer’s tax on the sale of homes to individuals who are not Canadian citizens or permanent residents.
To help buyers get into the market, the party is also proposing the creation of 30-year mortgages insured by the Canada Mortgage and Housing Corporation”.
Is That All There Is?
Well, if it is — God help us all. Not a great consolation to all the young Canadian families hoping to see a solution to a housing crisis that actually works… To me, all the above platforms are as flat as a pancake. And I am not saying so for the first time…
Back in 2016, more than 5 years ago, I wrote a LinkedIn post entitled: “The Canadian Housing Bubble — And How To Fix It At One Fell Swoop”.
And since then, I have sent emails to all the political parties and offered my help. Sadly enough, I didn’t receive even a single question about my proposals… And in their infinite wisdom, the politicians must have decided that they know all the answers already. Who am I to beg the difference?
Well, Scheherazade was one the most successful storytellers — aiming at Sultan’s brains and sex appeal. I’m not blessed with Scheherazade’s good looks, so in my story, I will only target your brains. But my story will cover the left and the right side of your brain — focusing on analytical logic AND captivating emotions…
I Told You So…
My thesis was quite simple: without a federal solution addressing the root cause of the problem — the housing bubble is going to get worse, not better. You can’t fix just a little bit housing problem the same way you can’t be just a little bit pregnant…
The proposed “solutions” are more like rearranging the chairs on a deck of the Titanic. And you can’t just let cities such as Toronto or Vancouver deal with it. It is an insult to Canadian intelligence…
And how many more years are we going to hide behind the tightening of the mortgage rules? Didn’t we try it already and for so many times? It never worked before and now it begins to fit the classic definition of insanity by Albert Einstein…
BTW, I forwarded a copy of my blog to the Prime Minister’s Office… 5+ years ago! Since then, my email was forwarded to and reviewed by CMHC, and then sent to the Minister of Finance. And I was told that the biggest problem is the lack of data on foreign ownership.
Well, 5 years later, we do have plenty of data — so what exactly are we waiting for? As long as the STRUCTURAL problems of a housing bubble are not properly addressed — we are not going to solve the root causes!
Capital Gains Exemptions
So, I’m asking once more: why not present a solution that works? My proposal will reduce attractiveness to speculators — as there will be no more capital gain exemption at the time of property sale…
Mortgage Interest Deductibility
It will also Increase Home Ownership Affordability — by deducting mortgage interest payments from the taxable income of hard-working Canadians. In addition, it will also Restore Supply & Demand Balance…
Government Tax Revenues
Moreover, it will also bring Additional Tax Revenues to the government that will be shared more equitably in every case of unusual home value appreciation…
And yes, instead of a piece-meal approach involving different provinces & cities — it’s time to take Real Estate capital gains advantage AWAY from ALL the speculators — regardless of where they reside.
Bring federal tax reforms to help young Canadian families with mortgage interest deductibility reforms! Real estate speculators will do all they can to create housing bubbles and cash out. So, put an end to it once and for all…
Political Backlash Can Be Easily Avoided
Very few issues can grab the hearts and minds of young Canadian families as the housing bubble in the large cities. It’s time to propose fresh and innovative ideas to young Canadians. And it doesn’t have to be politically unattractive…
So, don’t even think about making the new laws RETROACTIVE. If all the EXISTING homeowners are exempt from capital gains taxes, a simple announcement regarding all FUTURE home buyers being subjected to the new tax will bring the desired chilling effect — without the radical shocks to the system
Call The Spade, Spade
To me, the focus on a single issue such as foreign buyer tax of 1,2,3, or even 20% is not sufficient. Didn’t BC already try imposing such taxes and in EXACTLY the same order? After all, there is a good reason for saying: if it happens once — perhaps it’s a random event; twice — perhaps it’s a coincidence; three times — it’s a PATTERN!
If you just build more houses without the reforms I proposed, the foreign speculators will find a way to be the first in line to buy them. And they don’t need any mortgages to close the transaction in a hurry…
When the Chinese investors lose trillions of dollars on Chinese stock exchanges in a matter of few weeks, they will seek out viable alternatives to park their money — in draws. Do you think that 1,2,3, or even 20% tax will deter them?
Stop pumping oxygen into the speculators’ lungs. No human being can survive without it — not even the greatest parasites leeching off a housing crisis… So, my advice to the federal politicians is as follows: don’t forget that even according to Merriam-Webster “a competition between rivals to determine superiority, predominance, or leadership” — is also called… a “pissing match”.
There is also only a few letters difference — in spelling “Mediocracy” vs. Meritocracy. Unfortunately, just a few letters may mean a world of difference to future generations of young Canadian families…
Canadians need homes, not circuses. And if the laundry list of ineffective housing policies delivers no results — many of the federal politicians will be labeled as mere clowns…
For More Information…
For more information, please see my posts on LinkedIn, Twitter, Medium, and CGE’s website.
AI Boogeyman
You can also find additional info in my book on amazon: “AI Boogeyman — Dispelling Fake News About Job Losses”, and on our YouTube Studio channel… Thank you.
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