The Liberal government’s 2024 federal budget unveiled Tuesday clearly focused on “fairness” between generations and efforts to make the housing market more affordable, particularly for younger Canadians who are frustrated by their property-buying prospects. living place.
Experts who spoke to Global News after the budget was released said there are signs of “hope” in the new spending plan’s efforts to improve access to Canada’s often unaffordable housing market.
But Canadians hoping to get a head start on buying their first home will largely have to wait, market watchers say, and some measures aimed at improving affordability could inadvertently make the situation worse for potential buyers.
“I wish I could convey the message that tomorrow everything will be better,” says Paul Kershaw, an associate professor at the University of British Columbia and founder of Generation Squeeze.
Kershaw says the key barrier many young people face trying to enter the housing market is that Canada has allowed rising home prices to outpace wage growth for “decades.”
Older Canadians have benefited from this wealth accumulation, while the younger generation often struggles to enter the market and acquire capital so they can also benefit from rising home values, he says.
There is no quick fix the federal budget can offer to rebalance these generational divides that he says have been widening for years.
But Kershaw says the 2024 budget is nonetheless a “game changer,” specifically because a federal tax document now formally recognizes that these generational differences are driving class dynamics in Canada.
“This budget explicitly acknowledges to a younger demographic that their hard work is not paying off like it did for previous generations. And the first step to solving a problem is recognizing that you have it,” says Kershaw.
“Indeed, I am very hopeful that, in the future, we will make more urgent progress in restoring housing affordability and supporting people to manage their renting and manage their aspirations to enter property markets.”
Will the federal budget help build more housing?
John Pasalis, president and broker of Realosophy Realty in Toronto, tells Global News that he, too, is encouraged by many of the measures included in the budget.
“I think there are measures that will ease the pressure on price growth, which will help affordability in the coming years. And I think that’s important,” she states.
The federal government proposed about $8.5 billion in new housing initiatives in the 2024 budget amid a promise to build about 3.87 million homes by 2031.
Pasalis says a return to post-war tax incentives to encourage new purpose-built rental construction will help stimulate the supply of new rental housing in Canada. Making more federal land available for the development of non-market housing that can offer cheaper rents than traditional units is also a positive development, she says.
These are “long-term policies,” says Pasalis, and it will take time before renters and homebuyers see the impact of expanded supply on the market.
“It’s not like we’re going to see this flood of new listings or rentals. But at the end of the day, these are important investments that will help our real estate market for the next five, 10 or 15 years,” he says.
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Francis Fong, senior economist at TD Bank, told Global News on Tuesday that housing affordability has been a “very difficult issue to solve” for the Liberal government.
He said the federal government’s housing construction targets are “ambitious” and will require a pace of construction never seen before in Canada.
Whether Canada succeeds in restoring affordability will depend on whether Ottawa can get provinces and municipalities to the table to help start work, Fong said.
“Will all of this come together and actually lead to increased housing supply, which is ultimately the factor that will lead to improved housing affordability?” I think right now the jury is out,” she said.
“But what I have seen so far, I will at least give the government a fighting chance.”
Will Budget 2024 make housing more affordable in the short term?
While housing supply increases will take more than a decade to impact housing market dynamics, Pasalis says there is “no immediate solution” for Canadians who can’t buy a home or qualify for a mortgage today. .
“Unfortunately, there is no fast track to housing affordability,” he says.
Among the proposed items in the 2024 budget, Pasalis says the move to allow Canadians to withdraw up to $60,000 through the Home Buyers Plan RRSP, an increase from the previous $35,000, will help some prospective buyers save for the payment initial.
Elsewhere in the budget, the Liberals proposed changes to allow first-time homebuyers with an insured mortgage to extend their repayments to 30 years, up from the typical 25, when purchasing a new-build home. Such a move would reduce monthly mortgage maintenance costs, but could cause homeowners to pay more interest over the life of the loan.
But Leah Zlatkin, a mortgage broker and lowerrates.ca expert, said in a statement Tuesday that these changes could have a limited impact on the housing market because they only apply to insured mortgages and new construction.
Insured mortgages generally only apply when a homebuyer puts less than 20 percent of the home’s purchase price down and when the property is valued at less than $1 million.
Developers typically require 20 percent down payments on newly built units, Zlatkin notes, which can preclude mortgage options secured from the start. Meanwhile, new homes purchased in Canada’s most expensive real estate markets, Toronto and Vancouver, are often priced above $1 million, ruling out secured mortgage options there as well.
Zlatkin added that he has been processing more mortgage pre-approvals in recent months, which could be a sign of growing interest in Canada’s spring housing market.
“This will continue to drive prices up, especially for newly built homes,” he said.
Fong said policies designed to attract more people into the housing market (by driving demand) often don’t work to restore affordability because they serve to intensify competition and drive up prices.
“We’ve seen policies aimed at increasing demand before and they don’t work,” he said Tuesday.
“At the end of the day, you have a very large group of buyers trying to allocate their money to a very small group of housing supply. So we really have to increase that supply.”
Will the federal budget improve the lives of renters?
The property market was not the only area of focus for Ottawa’s housing policies.
Included in the 2024 budget are proposals for a Canadian Tenants’ Bill of Rights. The Liberals say the funding behind the bill will help push back on practices like “flips” and give tenants a boost in negotiations with landlords by forcing landlords to disclose a unit’s rental price history.
The budget also includes a framework to allow renters to build their credit scores using their monthly rental payments in the same way that landlords benefit from paying off their mortgages.
Kershaw said the tenants’ bill of rights is “really critical.”
Canadians who rent face an “uneven playing field” when negotiating with landlords in a tight rental market, he says, and the proposed actions could “empower” renters whether they want to continue renting or eventually hope to be owners.
Pasalis is less convinced that the supports would change tenants’ frustrations. Knowing the rental history of a property from five years ago won’t help Canadians trying to negotiate a lease today, he argues.
“Those are terrible policies. Frankly, they are solving problems that don’t exist,” says Pasalis.
“The challenge for most renters when purchasing a home is not that the rent is not in their credit score. “It’s just that rents are too high and housing prices are too high.”
Pasalis says that outside of the housing market, recently announced federal policies to set targets for the flow of non-permanent residents to Canada could have a greater impact by taking demand out of the market and putting less “upward pressure” on rents in the coming years. . forward.
