CMHC suggests plans to boost building
February 13, 2018
In what Canada Mortgage and Housing Corp. (CMHC) says is the “the most thorough examination of house price patterns ever completed in Canada,” the federal agency floats some controversial ideas to increase housing supply.
Released February 7, the 225-page report, Examining Escalating House Prices in Large Canadian Metropolitan Centres, involved 18 academics, a number of industry stakeholders and CMHC, and suggested new two measures to increase housing supply.
When asked what findings stood out for him, report author and CMHC deputy chief economist, Aled Ab Iorwerth, said it was the clear correlation between rising incomes and higher home prices for the study period from 2010 to 2016.
“Local wealth proved a very important factor in home price increases,” Ab Iorweth said.
The study found that disposable income in Vancouver increased 36.2 per cent from 2010 to 2016 while it increased 19.2 per cent in Toronto; both were the highest in Canada. Average housing prices increased 48 per cent and 40 per cent in Vancouver and Toronto respectively; also the highest in Canada.
Ab Iorweth added that wealthier cities, such as Toronto and Vancouver, also tend to attract more immigrants, which places higher demand on the housing supply. The two cities have the highest immigration levels of any metro centres in the country.
The study also pointed to a “low supply response” for increased house prices, especially in Vancouver.
CMHC’s report suggested two measures to increase housing supply—neither of which would likely prove an easy sell to industry or the public.
One idea floated is a “sunset clause” penalty based on the length of time an investor held land before it was released for new homes.
CMHC spokesman Charles Sauriol explained that, “Effectively-applied taxes could include taxes based on whether or not a developer completed a proposed project—in effect encouraging more rapid development of land. Holding land vacant generates negative consequences for cities and citizens by delaying the tax revenue associated with land improved with structures and additions to housing supply.”
Another new concept involves potential incentives to municipalities who move quicker to facilitate the construction of higher-density housing.
“This is put forward as a useful area to explore to counter NIMBY [not in my backyard] sentiments with financial benefits, rather than a fully designed scheme at this point,” Sauriol explained. “Those benefits might be some form of grants from provincial or federal treasuries to municipalities to reward more intensive land usage and containment of sprawl.”
As Ab Iorweth told Home BUILDER, CMHC may have to “dig deeper” to find the real causes, and any potential cure, for escalating house prices in Canada’s biggest cities.