BC Liberal leader Andrew Wilkinson was ridiculed when he said renters were just going through a “wacky” phase before they grew up and bought a home.
But a key measure in Canada’s new federal budget embraced the same mythic ideal of home ownership (and the same neglect of the reality for renters). The program offers a subsidy to people rich enough to buy a first home in today’s overheated urban markets.
The First-Time Home Buyer Incentive announced Tuesday is essentially an interest-free loan, with the Canada Mortgage and Housing Corporation (CMHC) covering 10 per cent of the price of a new home for first-time buyers with household incomes below $120,000. The program will cover five per cent of the purchase price of an existing home.
The budget describes it as a “shared equity mortgage,” but so far it’s unclear what that means, when payment will be due and whether CMHC will share increases or losses in the value of the home. Those details are all still to come.
But even with the little we do know, it’s hard to see this as a sensible policy.
Consider this example. If you can find a Vancouver condo for $500,000 (well below the average $659,000 price in the city), come up with the minimum five-per-cent down payment — $25,000 — and qualify for a mortgage, then taxpayers will give you a $50,000 interest-free subsidy.
Even with the subsidy, your mortgage, taxes and strata fees will come to about $2,600 a month.
So to spend a third of your income on housing, you need to have a household income of about $95,000. (The median household income in Vancouver is about $73,000.)
The program is certainly not cheap — the plan to subsidize home purchases is budgeted to cost $1.25 billion over three years. And it means renters will be paying taxes to help their more affluent neighbours buy houses or condos.
It will also increase demand — and thus prices — and encourage more people to buy into what looks like a potentially volatile market.
Home ownership has become a symbol of accomplishment, and renters — a third of Canadians — have been seen as people who haven’t quite made it (as Wilkinson suggested).
But instead of spending $416 million a year to subsidize relatively affluent first-time homebuyers, why not make the same commitment to help renters? The budget’s measure to support rental housing provides $110 million a year — far less than the homeowner incentive.
Canadians have fetishized home ownership since the veterans came back from the Second World War. The budget aims to keep the obsession alive.
In other countries, renters are in the majority, often with subsidized rents or in publicly owned housing.
But in Canada, and especially in Vancouver, we’ve lived in a real estate crazy land, with soaring prices and rents, and the constant threat of renoviction.
The First-Time Home Buyer Incentive is based on the belief that the chance to have a stable, affordable place to live requires a taxpayer-subsidized plunge into the home ownership lottery. (With the biggest benefits for developers of new housing.)
It’s an approach based on a housing model that is no longer working in much of the country.
And while it might sound good enough to win a few votes, it’s not going to fix the housing crisis.
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