Bubble boy

The focus narrows. There are now but two issues in the federal campaign. Healthcare and houses. And of those, guess which the biggest cohort of voters cares about most?

Bingo. Unleash the hormones. Mr. Socks has gone full-on with house lust.

The Liberal real estate strategy is breathtaking. It has all the depth a plan formulated in the campaign plane washroom on the back of those handwipe packets. In other words, the government party is throwing everything it can possibly think of at the housing file because – all of a sudden – it might not ace this election. If the object is to make houses cheaper, it’s a giant fail. But, of course, the goal is to win votes.

In case you missed it, here are the main points. Do not attempt to read this while drinking anything.

• After gutting contributions for everybody’s TFSA, Trudeau wants to create a new one. But only for people under 40. And only to buy a house. They could stash $40,000 in there, grow it tax free and use the cash for a downpayment. Forty grand equals almost seven years of regular allowable TFSA contributions, by the way, but this amount could instantly be sheltered for a property. This is in addition to tax-free RRSP withdrawals ($70,000 per couple) to buy real estate. Now two newbies could suck $150,000 from registered funds with no tax payable. Over 40? Saving and investing for retirement? Well, suck it up. This is the Realtor® PM.
• The federal government would also cover most closing costs by doubling the first-time homebuyers tax credit, from five grand to $10,000.
• Mortgage borrowing would be made less expensive and leverage encouraged by slashing the cost of mandatory CMHC insurance for all high-ratio mortgages (less than 20% down). The premium would drop by 25%, saving more than $6,000 on average.
• A multigenerational tax credit would be created to encourage families to buy and expand housing or to add a secondary unit.
• Over $1 billion will be spent on a “rent-to-own” program which would “create a pathway” for tenants to become owners of a property within five years.
• And the feds would hand over $4 billion to cities for a “pool of cash” to be used if they created “middle class housing.”

Can you think of additional ways to increase demand for scarce listings, rendering it more attractive and appealing for first-time buyers to compete for houses and further escalate prices? Nah, me neither.

There’s more. Lots more.

To feed unsubstantiated public myth and copy the Cons and Dippers, Trudeau would also ban any non-Canadians from buying a property. The Libs would find another $3 billion to repair “affordable” homes or convert office space (if people want to WFH they might as well move into their cubicle). The government would tax the poop out of anyone buying a home and selling it before 12 months had passed. But keep it for 13 months and pay 0%. They’d expand the anti-foreigner vacant home tax to apply to vacant land.

And more. T2 would create a “Home Buyers’ Bill of Rights”. Yes, some of these things are good, needed and responsible. But they fall 100% under provincial jurisdiction. They include a ban on blind auctions, total transparency on a property’s price history, increased realtor disclosure, automatic mortgage deferrals in the event of job loss (because a house is now a right) plus the legal right of buyers to a home inspection.

Oh, and did I mention that the Libs will build 1.4 million homes in three years? That came after the Con promises to put up a million. Both of those numbers are, of course, fiction. The entire private sector produces only about 200,000 units nationally, the bulk of those being condos.

Meanwhile, have we heard this story before? Like in 2015? That summer the average detached GTA house cost $792,000 as Mr. Trudeau was campaigning and promising to increase affordability. Now the average is $1,405,500. Yes, that’s a 77% increase since you saw this headline…

So, let’s face it. Governments and politicians seeking power have been instrumental in increasing demand and inflating the prices they now claim they can fix. The Liberals increased the limit on the RRSP Home Buyers plan. They oversaw a monetary policy creating historically-low rates. They supported real estate values during the pandemic with massive transfers of money and widespread mortgage forbearance.

They created a shared-equity mortgage encouraging buyers to borrow with minimal downpayments. And they shoveled $70 billion over ten years (this is number six) into a national housing strategy. The last economic statement contained $13 billion for the plan. All this money was to create 160,000 units. They have not been delivered. And now we’re told the “new new” version will created 1.4 million.

Now you know the plan. When something doesn’t work, keep doing it.

About the picture: “I am a fan of the blog and am a daily reader,” writes Michael. “My fiancé and I are in our late 30s and have been trying our best to build up our retirement savings. We both spent our 20s seeing the world (her becoming a divemaster in Thailand and me touring in a band), but in the last few years we’ve made it our mission to eradicate debt and build net worth. And by being flexible renters, we are succeeding! We live lightly and take up house sitting opportunities for most of the year, which keeps our expenses very low. This has freed up a lot of cash to reduce debt (which will be zeroed out by the end of the year) and invest in low cost index funds. If you’re in need of another dog photo for the blog, I’ve attached a photo of our pooch Dexter.”