The federal government has announced new initiatives to address housing affordability.
These include a program called the First Time Home Buyer Incentive which provides a CMHC equity loan to first time buyers earning less than $120,000 annually.
Still to be answered are questions about how CMHC will participate as an equity partner in the home buying process.
They also raised the amount a home buyer may withdraw from their RRSP – now up to $35,000.
These measures are in response to high housing prices despite declining sales created last year by the mortgage stress test, designed to limit demand.
So many buyers were eliminated from the market that the Canadian economy was significantly, adversely impacted.
The federal govt introduced these new programs hoping to return some of those buyers to the market.
That said, the problem is unaffordability due to a large millennial demographic starting families and competing for an inadequate supply of homes.
This lack of supply was acknowledged in the budget by a new “Housing Supply Challenge” encouraging municipalities to break down barriers to housing.
These barriers are often rooted in inadequate rezoning, high permit costs, slow approvals, and community opposition to more density, all of which require strong measures to resolve.
A Times Colonist editorial summed up the new initiatives saying, “Too many of the promises are either drops in the ocean or time-delayed.”
That is likely, especially in our region of very high prices where greater supply and longer amortization rates might be more effective.
Regardless, millennials need initiatives to address housing affordability, otherwise sales are sure to continue declining, along with housing starts, jobs and the Canadian economy.
The results of these new programs remain to be seen.