Speaking before the Standing Committee on Finance on Tuesday during pre-budget consultations for Budget 2025, Butler called on the government to tackle the deepening housing affordability crisis, emphasizing the significant barriers facing prospective homeowners.
He pointed to the widening gap between Canadians who already own homes and those for whom homeownership may remain out of reach due to soaring property prices and sluggish wage growth.
“Homeownership is no longer a reasonable middle-class expectation for young people,” Butler said, emphasizing that many young Canadians are entirely dependent on family co-signers or financial gifts to buy property.
He described the situation as “a tragedy,” explaining that the days of middle-income earners easily accessing the housing market have vanished, perhaps with the exception of those in rural communities in the Prairies and Atlantic Canada.
“Without cosigners, without significant gifts of down payment in major centres across Canada, there are no opportunities for people of a moderate income,” he told the committee.
As of September, the national average home price was $674,400, up 2.3% year-over-year increase but a roughly 38% increase from five years ago. In Ontario and British Columbia, the average home price is even higher, surpassing $1 million in Toronto and Vancouver.
Butler calls into question government’s new mortgage reforms
Butler also raised concerns over the government’s recently announced mortgage reforms, particularly the expanded Canada Mortgage and Housing Corporation (CMHC) program.
He questioned the rationale behind increasing the insured mortgage cap to $1.5 million, calling it an excessive amount, especially when compared to the U.S., where a similar program under the Federal Housing Administration has a cap of around $766,000 in high-cost areas. Butler pointed out the stark difference, emphasizing that Canada, with fewer high-priced cities like New York or San Francisco, should not require such a high cap.
“My constant refrain is that the price of houses in Canada and, certainly in Ontario, is just incredibly high. And measures that support a $1.5-million starter home have reasonably got to be called into question,” he said.
When asked by MP Pat Kelly if the increase to the insured mortgage cap to $1.5 million would help young Canadians with housing affordability, Butler pointed out that the upper limit of the program require a household income of $352,000: “There is no reasonable hope that this encompasses the average range of income.”
Growing concern over housing supply
In his testimony, Butler also raised significant concerns about Canada’s housing supply over the next several years. He warned that the country is facing a potential “freefall” in housing construction, particularly in high-demand areas like Ontario and British Columbia.
Butler pointed out that rising construction costs and slowing new home sales, driven by affordability challenges, are contributing to this downturn. Developers are increasingly scaling back or cancelling projects because they’re unable to sell enough pre-sale units to make these developments financially viable.
“We’re going to reach a point in four years where the total number of new units constructed in the GTA (Greater Toronto Area) will be 1,500,” Butler said. “That’s the direction we’re headed.”
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Last modified: October 23, 2024
The issue worth dealing with is not the “dream of home ownership.” In fact, that is the root of the problem. The issue is shelter. Increasing the demand for real property as an investment will only continue the upward pressure on prices reducing the availability of shelter. Even social housing requires the purchase of real-estate and driving up the cost is NOT part of the solution. It is the problem.
Unfortunately, the “dream” spoke of has inevitably become the nightmare. It is so engrained in our culture we almost treat the ability to invest in real estate as a human right. Shelter should be a human right. Thus requiring us to unravel this mess that has led to the investment value of our homes attracting more and more non-shelter seeking investors into the pool such that reduced demand from prospective homeowners is no longer enough to stop the continual increase in value.
Obviously, the price of shelter rising faster than average income (or inflation generally) is going to eventually lead to a point where it can no longer be afforded. This is unavoidable. But two problems have shut-off the normal equilibrium-seeking nature of the market. 1. Continual artificial measures to “help” investors into the market and 2. The market is no longer driven by shelter-seekers alone.
The measures required at this point are many and complex and they are also going to be a hard pill to swallow. Shut off the incentives. Treat shelter as shelter – not an investment. Treat us “lucky ones” (suckers) that built our wealth on the gravy train with some sympathy but nonetheless – help us get off at the next station.
STOP – capital gains exemptions, 30 year mortgages, CMHC schemes for first time home buyers and so on. START building social housing and measure that investment based on actual needs. For the required over-simplied measure – make expenditures on social housing for federal and provincial governments a % of GDP.
Start now.
He is so right, why do people keep talking about interest rates? Even if the interest rates went down to 1%, new homebuyers cannot afford a house at these prices, it’s about time someone is saying the truth, the narrative that realtors are putting out is that if interest rates go down everyone will be jumping to buy a house, in reality, and in my opinion, they don’t want house prices to go down! The only people that benefit are realtors, investors or people selling their home to retire with.