Why Canada needs to focus on ways to encourage more home building

DAN REES AND JEAN-FRAN‚OIS PERRAULT

CONTRIBUTED TO THE GLOBE AND MAILPUBLISHED 

Dan Rees is group head, Canadian banking at the Bank of Nova Scotia. Jean-Franois Perraultis Scotiabank’s chief economist

The recent run-up in housing prices, and the attendant worries about affordability and accessibility, have many stakeholders scrambling to find quick solutions. While understandable, those approaches are likely to have only minimal impacts on Canada’shousing situation and its consequences for people looking for a reasonably priced place to live.

Focusing on interest rate policy or macroprudential instruments, such as stricter mortgage stress tests, draws attention away from the underlying cause of the problem: the inability of supply to meet demand. Put simply, this country doesn’t build enough housing. We should not be surprised by this. Canada has increased immigration dramatically in recent years to tremendous benefit to the economy, but we failed to pro-actively address the housing challenges the consequent population boom was sure to bring. Policy efforts must focus far more on anticipatory, collaborative, multi-stakeholder and very specific solutions to the housing situation rather than on the short-term and ultimately ineffective macroprudential Band-Aids applied in recent years.

Scotiabank Economics is publishing research this week looking at the increase in Canada’shousing stock relative to the increase in population over the past several years to get a sense of how effective we have been in creating new units.

The numbers are not encouraging.

One way to look at it is by using the ratio of new housing to population growth. By that measure, construction has been well below its historical average since mid-2017. That is perhaps not surprising, given that Canada has seen an immigration-fuelled population boom since 2015. In the three years leading up to the COVID-19 pandemic, population grew nearly twice as fast as new housing units were being built. That ratio improved some what with the COVID-related stall in immigration, but it is likely to reverse course once immigration returns to planned levels. The total number of housing units in Canada relative to population might be the most informative metric in assessing the gap between needs and availability. There were fewer homes per 1,000 Canadians in 2020 than in 2016. For the ratio to have remained stable, an additional 90,000 units should have been built in Canada over that time.

We also compared Canada’s ratio of housing units to population with those of some of our peer countries, which makes the point more starkly. The average number of housing units per 1,000 residents across the Group of Seven, including Canada, is 471. Canada’s ratio is 424 per 1,000. To resolve this shortfall, it would take 1.8 million homes, in addition to what currently exists in Canada, to achieve the required level of housing supply relative to the population.

Just catching up to the U.S. ratio would require about 100,000 additional units. To match the U.K. would require about 250,000 extra homes. We have averaged just 188,000 completions annually over the past 10 years. Why is this the case? Our bank’s developer and real estate clients across the country have told us the main impediments to supply growth are in planning and approval processes, which in many cities can be lengthy and political.  Any number of provisions can delay or derail development applications. From a rental perspective, the structure of requirements to build housing, rent controls and rising development charges are among the main obstacles. Shortages of skilled trades are also affecting builders’ ability to meet demand. We must act quickly to address the factors limiting the supply response of all forms ofhousing: owned, rentals, affordable, single-family and multifamily.

We propose that Ottawa convene a national table bringing together federal, provincial and municipal authorities along with builders, developers and civil society organizations to document the multiple challenges to raising supply, and to identify solutions to these obstacles. Given the urgency of the supply challenge, this table should be convened quickly and report on potential solutions within the next six months, with commitments by all parties to act immediately upon them. Additional federal funding to incentivize provinces and municipalities to overcome political obstacles will almost certainly be required. The federal government could tie future transit funding to population density and speed-of-approval objectives, for instance. Or it could offer incentives for cities that responsibly raise density to a certain threshold.

Solving our country’s housing challenge should be a national priority. The steep increase in prices will have severe consequences across our cities and towns and impact all income levels. Affordable rent will be less attainable for our essential workers. Home buyers will continue to flee cities to suburbs and small towns, affecting affordability and forcing more people to commute. First-time buyers and young Canadians will be kept out of the housing market altogether. And existing middle-class families will be incapable of upsizing to accommodate growing and multi generational families.

The sustainable solution is not rooted in the interest rate or macroprudential space, but in a determined effort to remove obstacles that limit the supply response of housing. A comprehensive national approach should be pursued to identify changes that could increase the responsiveness of supply to demand, and those changes should be implemented aggressively.

Canadians want to own a home. Developers want to build them. Let’s help make that happen.

Your time is valuable. 

Bank of Canada Stands Ready To Do Whatever It Takes

On the heels of a devastating decline in the Canadian economy, the Bank of Canada is taking unprecedented actions. With record job losses, plunging confidence and a shutdown of most businesses, this month’s newly released Monetary Policy Report (MPR) is a portrait of extreme financial stress and a sharp and sudden contraction across the globe. COVID-19 and the collapse in oil prices are having a never-before-seen economic impact and policy response.

The Bank’s MPR says, “Until the outbreak is contained, a substantial proportion of economic activity will be affected. The suddenness of these effects has created shockwaves in financial markets, leading to a general flight to safety, a sharp repricing of risky assets and a breakdown in the functioning of many markets.” It goes on to state, “While the global and Canadian economies are expected to rebound once the medical emergency ends, the timing and strength of the recovery will depend heavily on how the pandemic unfolds and what measures are required to contain it. The recovery will also depend on how households and businesses behave in response. None of these can be forecast with any degree of confidence.”

“The Canadian economy was in a solid position ahead of the COVID-19 outbreak but has since been hit by widespread shutdowns and lower oil prices. One early measure of the extent of the damage was an unprecedented drop in employment in March, with more than one million jobs lost across Canada. Many more workers reported shorter hours, and by early April, some six million Canadians had applied for the Canada Emergency Response Benefit.”

“The sudden halt in global activity will be followed by regional recoveries at different times, depending on the duration and severity of the outbreak in each region. This means that the global economic recovery, when it comes, could be protracted and uneven.”

Today’s MPR breaks with tradition. It does not provide a detailed economic forecast. Such forecasts are useless given the degree of uncertainty and the lack of former relevant precedents. However, Bank analysis of alternative scenarios suggests the level of real activity was down 1%-to-3% in the first quarter of this year and will be 15%-to-30% lower in the second quarter than in Q4 of 2019. Inflation is forecast at 0%, mainly owing to the fall in gasoline prices.

“Fiscal programs, designed to expand according to the magnitude of the shock, will help individuals and businesses weather this shutdown phase of the pandemic, and support incomes and confidence leading into the recovery. These programs have been complemented by actions taken by other federal agencies and provincial governments.”

The Bank of Canada, along with all other central banks, have taken measures to support the functioning of core financial markets and provide liquidity to financial institutions, including making large-scale asset purchases and sharply lowering interest rates. The Bank reduced overnight interest rates in three steps last month by 150 basis points to 0.25%, which the Bank considers its “effective lower bound”. It did not cut this policy rate again today, as promised, believing that negative interest rates are not the appropriate policy response. The Bank has also conducted lending operations to financial institutions and asset purchases in core funding markets, amounting to around $200 billion.

“These actions have served to ease market dysfunction and help keep credit channels open, although they remain strained. The next challenge for markets will be managing increased demand for near-term financing by federal and provincial governments, and businesses and households. The situation calls for special actions by the central bank.”

The Bank of Canada, in its efforts to provide liquidity to all strained financial markets, has, in essence, become the buyer of last resort. Under its previously-announced program, the Bank will continue to purchase at least $5 billion in Government of Canada securities per week in the secondary market. It will increase the level of purchases as required to maintain the proper functioning of the government bond market. Also, the Bank is temporarily increasing the amount of Treasury Bills it acquires at auctions to up to 40%, effective immediately.

The Bank announced new measures to provide additional support for Canada’s financial system. It will commence a new Provincial Bond Purchase Program of up to $50 billion, to supplement its Provincial Money Market Purchase Program. Further, the Bank is announcing a new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment-grade corporate bonds in the secondary market. Both of these programs will be put in place in the coming weeks. Finally, the Bank is further enhancing its term repo facility to permit funding for up to 24 months.

The Bank will support all Canadian financial markets, with the exception of the stock market, and it “stands ready to adjust the scale or duration of its programs if necessary. All the Bank’s actions are aimed at helping to bridge the current period of containment and create the conditions for a sustainable recovery and achievement of the inflation target over time.”

This is exactly what the central bank needs to do to instill confidence that Canadian financial markets will remain viable. These measures are a warranted offset to panic selling. Too many investors are prone to panic in times like these, which has a snowball effect that must be avoided. As long as people are confident that the Bank of Canada is a backstop, panic can be mitigated. The Bank of Canada deserves high marks for responding effectively to this crisis and remaining on guard. Governor Poloz and the Governing Council saw it early for what it is, a Black Swan of enormous proportions.

As a result, Canada will not only weather the pandemic storm better than many other countries, but we will come out of this economic and financial tsunami in better condition.

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca

A huge thanks to the Campbell River Mirror and to all who voted. RealPro is a small boutique firm that is dependent on the success of our community and to have your support is a great honour.  Congratulations to all the finalists and winners!

In hot real estate markets, it’s common for both buyers and agents to consider having no subjects to financing when making a purchase offer.

It’s important to realize, however, that no professional is in a position to legally advise you to enter into a real estate transaction with no subjects, especially no subject to financing.

This is a personal choice that you must carefully consider. Understanding the risks involved will help you make an informed decision.

Keep these three points in mind when making the choice with which you will be most comfortable:

1. Regardless of whether you have secured a rate hold / pre-approval, the lender has the right at any time to decline the property. This can occur for a number of reasons including but not limited to: value, condition, wiring, tanks, strata documents, zoning, work completed without permits, full fix completed without proper documentation, rental components or remaining economic life. Lenders only review property details once an accepted offer is in place – not when you’re simply considering making an offer or during the time you’re going back and forth as part of the negotiating process. They then review the contract, property disclosure statement (PDS) and anything else accordingly.

2. Even if a lender has approved you based on credit and income, if your scenario has since changed and they request further documentation (eg, you haven’t received enough overtime, you spent more on your credit cards, your employment/credit has changed or there was something you may have forgotten to disclose), they have the right to alter or cancel the approval. All lenders only do a full review of your credit and income once you have an accepted offer in place. They only view an application for rate hold or pre-approval purposes and verify once an accepted offer is in place with the right reserved to disregard the pre-approval, or even an approval at any time for the above reasons while doing their due diligence, right up until closing.

3. Who is in the best position to go into a purchase with no subjects? Borrowers who:

– Are overqualified for the purchase

– Can afford a higher payment if the original plan doesn’t work out with any of the above points

– Have their own cash (not a gift pending qualifications) far in excess of what was intended

– Have income that far surpasses what is required

As Accredited Mortgage Professionals, it’s our responsibility / fiduciary duty to be honest and transparent, and give you the power of choice with clarity on all the considerations to anticipate scenarios that may arise, so you can make the best choices for your family. It would be much easier to be a yes person and cross our fingers that none of this comes up, but it’s not how a professional should guide you, as you come to trust in our clarity, knowledge and experience. When you have this expertise coupled with the right real estate agent, they too will ensure you take the emotion out of the purchase, and protect you accordingly with subjects you’re comfortable with for your personal circumstances so your choice is calculated, clear and comfortable long term.

RealPro Tips for Moving.

As a real estate agent I rarely think about what happens after we close on a home. This is usually where our job ends, but when a buyer receives the keys to their new home, that is when the difficult part starts. A friend of mine recently purchased a new home and  decided to move on her own with a little help from friends....( me) . I thought it would be easy just making a couple of trips back and forth from the old home to the new place. Boy was I wrong!  There are many things that need to be done way ahead of time to limit the speed bumps along the way. As soon as escrow opens here are my tips for moving. See  the checklist below to see our tips to moving! Enjoy your new home!

1-2 Months before Move

• Create binder/folder for moving records (estimates, receipts, inventory lists, etc.)
• Plan your moving method (truck rental, hiring movers, etc.) and get cost estimates
• See if your employer will provide moving expense benefits
• Research storage facilities if needed
• Schedule disconnection/connection of utilities at old and new place

 [ ] Phone [ ] Internet [ ] Cable [ ] Water [ ] Garbage [ ] Gas [ ] Electric

• Plan how you will move vehicles, plants, pets and valuables
• Plan how you will arrange furniture in the new place - use a floor plan or sketch
• Hold a garage sale, donate, sell, or trash unnecessary items
• Schedule transfer of records (medical, children in school, etc.)
• Get copies of any records needed (medical, dental, etc.)
• Acquire packing materials (boxes, tape, stuffing/padding, markers, etc.)
• Make any home repairs that you have committed to making
• Return borrowed, checked-out and rented items
• Get things back that you have lent out
• Start using up food you have stored so there is less to move
• 3 -4 Weeks before Move
• Finalize moving method and make necessary arrangements
• Begin packing non-essential items
• Label boxes by room and contents
• Separate valuable items to transport yourself - label as DO NOT MOVE
• Keep a box out for storing pieces, parts and essential tools that you will want to keep with you on move day - label as PARTS / DO NOT MOVE
• Create an inventory list of items and box contents, including serial numbers of major items - use this as an opportunity to update your home inventory
• Fill out a Change of Address form at a post office or online
• Provide important contacts with your new address:
• [ ] Employers [ ] Family & Friends [ ] Attorney [ ] Accountant [ ] Others
• Notify your insurance and credit card companies about change of address
• Cancel automated payment plans and local accounts/memberships if necessary
• Take your vehicle(s) in for a tune-up, especially if you are traveling very far
• 1 -2 Weeks before Move
• Continue packing and clean as you go
• Pack items separately that you will need right away at your new place
• Plan to take the day off for moving day

Welcome to RealPro Real Estate!

100% locally owned and operated in Campbell River.

Our founder Paul Stapley a neighborhood kid growing up in Campbell River always had a love for hard work and helping people.  Paul has been working with his family in Real Estate from a very young age and after his father passed away he took over and completed the development of the Mittlenatch subdivision and went on to completing many succesful development projects. After completing his license in 1989 from UBC School Sauder of Business he excelled as a top producer. Despite his success and experience, he realized something was missing. Instead of treating each client like a number he wanted to treat each client as an individual.

In May of 2014 Paul Stapley opened RealPro Real Estate partnering with Dominion Lending Coastal Mortgages.Since then RealPro Real Estate has become the fastest growing real estate company in Campbell River, helping thousands of people with their buying, selling, and mortgage needs.  Each of our professionals realtors are part owners in the company and put money back into the local business and development of Campbell River.  Simply put we care about the financial well-being of the people of Campbell River and surrounding areas. We believe we need to put our financial resources in our community.

At RealPro together with Dominion Lending Coastal Mortgages we are a full service company helping you buy and sell real estate in one of the most beautiful places on earth.  We are one “exciting local thing” making a big difference in Campbell River.

The Real Pro team attributes their ongoing success to their philosophy “we treat each client like family"!

We wish you and your family a safe, happy and peaceful festive season and extend our sincere thanks for your support this year.  From our team to yours Merry Christmas!

Realpro Real Estate is proud to welcome Kim Rollins to the team!  Kim knows that every transaction represents the most important purchase or sale a person can make.  Whether buying or selling your home, Kim is here to advise you throughout  the entire process.  A local expert, you can trust Kim to help you secure the home of your dreams at the best possible price.