Budget Targets Young Would-Be Homeowners

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I recently chatted with a successful and well-known real estate agent who told me something I knew, but didn’t know.

Everyone wants to talk about real estate. Everyone. People on the street, at parties, over lunch, even at family events. Everyone. All the time.

As I said, I always rather thought that housing was a favourite topic for many, but this agent is absolutely inundated with questions and speculative comments in his work and personal life. I wonder if he ever gets to talk about his kids, or the weather, or the Roughriders.

And so, it came as no surprise to me that the most ballyhooed tenet of last week’s federal budget related to housing. The assistance to, basically, millennials was the lead on the news everywhere I looked. 

The government announced that Canada Mortgage and Housing Corp. (CMHC) will provide interest-free loans of 10 per cent on new houses and five per cent on existing homes, if your household income is $120K or lower. This could lower mortgage payments, they say, by $228 per month. Good for a week’s groceries, perhaps.

You can also “borrow” $35,000 from your RRSP to buy a first home, up from $25,000. I wonder how many millennials have $35K lurking in those accounts.

Clearly, the feds are targeting younger, first-time homeowners, and perhaps rightly so. I suspect the Liberal government has taken note of the falling house sales across the country, which has been blamed by some on the same government’s year-ish-old means testing policy. 

When they brought that in, forcing people to prove they could afford a five-year mortgage rate, it knocked a lot of youngsters out of the running. Where they could once buy, perhaps, a $400K home, they were suddenly back in $300K land. Good luck buying a house for that in many Canadian markets.

On the plus side, it seems less risky to offer these new incentives than to encourage young people to borrow more, as Paul Kershaw of Generation Squeeze said on CBC TV. Another commentator suggested that targeting home-buying help to a particular demographic, instead of offering it to all, may prevent a surge in housing prices.

Everybody thinks Canadian housing is too expensive, and of course, it is/has been in some markets. But it’s a slightly skewed perception. What is outrageously priced in Toronto and Vancouver is absolutely fair and affordable in Moncton, for example. 

That being said, a surge in prices may not be the best thing for the market right now, or at least some markets. Canada is not one housing market; it’s comprised of many, many housing markets. You can’t compare a condo in Toronto with a bungalow in Meadow Lake, even if the Torontonian makes a lot more money. But if we want to get first-time home buyers into the market, a price surge would not be helpful.

Anyway, it looks to me that Justin Trudeau’s group wanted to assuage the fury over their means-testing policy, having noticed that it has taken a bite out of the market, not to mention the dreams of potential home buyers. They’ve also taken a few lobbying hits from the construction people, I am sure, since they’ve provided a sop to the industry by offering a higher loan from CMHC for new housing.

Politically, it works, I think. There is an election coming.

What worked less well for me was the so-called announcement on pharmacare. The budget provided $35 million over four years to set up a “transition office” for the Canadian Drug Agency. This would be essentially a new, national formulary providing a list of drugs that would cover everyone.

So yes, this needs to be studied and done correctly, and yes, we have to find the money for better drug coverage. But $35 million over four years? A functional agency is a long, long, long way out, and it’s starting out with a relatively small funding amount. 

The announcement in the budget allows the government to say it’s doing something about pharmacare — oh yes, it is; we are taking care of Canadians! — without committing to get it done in a timely fashion. 

Methinks this government will be long gone by the time the agency is operational. Even if the Liberals win the upcoming election with a majority, it’s unlikely that they’ll have to worry about where to find the drug funds in the long run. 

And there’s always back-tracking. I believe we were supposed to get electoral reform, too, yes? One day, the prime minister just said, no, we’re not doing that. End of story. I still don’t have a grip on why he did that.

But pharmacare does make a very nice platform piece. 

And at the very least, we’ll get some more young people into their first homes.