Homebuilders Want Looser Rules, As Owning 2-Story Home Takes Nearly Half Of Income

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With an average two-story house now costing half of a typical household’s income, a leading lobby group is pushing Ottawa to loosen lending rules and make it easier to build and buy homes.

That comes amid many analysts’ concerns that at least some Canadian housing markets are overheated, and what is needed is efforts to cool, rather than heat up, the housing sector.

According to government records obtained by the Globe and Mail, the Canadian Home Builders Association (CHBA) held a record number of meetings with federal officials and politicians last month — 61 in total. They are pushing the government to allow longer mortgage amortization periods for first-time home buyers, a tax reduction on home construction and a home reno tax break.

Extending the length of mortgages would amount to a reversal of this government’s policies thus far. The Harper government, under then Finance Minister Jim Flaherty, moved four times to reduce what it saw as an overheating housing market. The changes included reducing amortization periods from 35 years to the current 25, for mortgages insured by Canada Mortgage and Housing Corp.

The news comes as a new survey from RBC finds housing affordability has deteriorated in Toronto and Vancouver, two cities that have seen strong price gains in recent months, particularly in the detached-home market. Calgary, suffering from the oil price collapse, has seen home affordability improve, while nationally there was little change overall.

The RBC survey finds it now takes 47.9 per cent of a typical household’s pre-tax income to own a two-story home in Canada. That’s slightly more affordable than in the last survey, when it took 48.1 per cent of income. A detached bungalow takes 42.7 per cent of income, unchanged from the last survey, while it took 27.1 per cent of pre-tax household income to own a condo.

In Vancouver, a detached bungalow would eat 85.6 per cent of pre-tax household income, while in Montreal it would take only 37.2 per cent of income.

"Exceptionally low interest rates have been a key factor keeping housing affordability levels in a largely manageable state in recent years," RBC chief economist Craig Wright said in a statement. "The knock-on effect of the anticipated rise in rates would be most visible in high-priced markets."

With housing affordability top of mind for many voters, the CHBA is hoping some politicians will make loosening mortgage rules and lower taxes for home building a campaign issue, the Globe reports.

“What they’re thinking about is party platforms and getting back to their ridings and being able to have the right messages that resonate with their constituents,” the group’s CEO, Kevin Lee, told the paper.

Making policy for Canada’s housing markets has become difficult, particularly due to a divergence in conditions.

Prices and sales have been soaring in Toronto and Vancouver this year, while housing markets in Alberta have slumped in the wake of the oil price crash. Much of the rest of the country has seen sales and prices relatively flat over the past few years.

That makes it difficult for policymakers to decide whether to take steps — as Flaherty did — to cool an overheated market, or to stimulate some of the other, more moribund markets.

Flaherty’s replacement in the Finance Department, Joe Oliver, has taken a more hands-off approach to the housing market. He said last month he sees no housing bubble in Canada and “we do not see the need for major changes at this time.”

Bank of Canada Governor Stephen Poloz has also said he doesn’t believe the country is in a housing bubble, but the bank’s recent financial reviews have identified a housing market correction as one of the largest potential risks facing Canada’s economy.

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