With real estate prices at record highs, housing affordability has quickly become a hot-button topic ahead of next month's federal election. Party leaders have already come forward with various pledges on how to make home ownership feasible for Canadians that have been priced out of the market in major cities across Canada -- ranging from raising the allowable withdrawal from registered retirement savings plans (RRSPs), to allocating federal dollars to creating more affordable housing.
Despite record-low mortgage rates, many Canadians are still being priced out of the country's major cities such as Vancouver and Toronto for the simple reason that they don't generate enough income to come up with the minimum down payment required to purchase a home, or their income isn't high enough to meet the tough standards that lenders require to maintain their mortgage. With the Canadian economy officially in recession, these issues likely aren't going to resolve themselves on their own.
Most economists and market-watchers agree that while eliminating homelessness outright is a noble cause, it is not a realistic option for a free-market society like Canada's. Providing more low-cost housing options is certainly something that can and should be available to those in need, but controlling the price of any asset -- housing or otherwise -- typically doesn't work.
Other options such as allowing ways to utilize savings to purchase a home, providing tax credits for renovations and other tax incentives for potential and existing homeowners to turn part of their home into apartments has already proven more effective in other cities around the world. Even restrictions on foreign ownership of homes and condos -- something many are currently pointing to as one of the key reasons real estate prices continue to march higher -- has not been effective in keeping a lid on real estate prices.
In Canada, each party is offering very different solutions to a pervasive problem. The Conservatives are promising additional tax breaks and other ways to utilize savings to buy a home, especially for first-time home buyers. The Liberals are recommending spending $19.7 billion over 10 years on building affordable housing and seniors' facilities, as well as on improving infrastructure. The New Democrats, meanwhile, are advocating tax breaks to encourage construction of affordable rental units over the next 10 years, and also creating incentives for people to build more affordable housing.
Whichever party does get elected in October will have a lot of promises to live up to and strategies to employ when it comes to housing. Regardless, whether you are looking to buy your first home or condo, looking to downsize, or simply looking to refinance to pay down your mortgage and other debts faster, there are things Canadians can still do that can make home ownership attainable no matter what election promises eventually become reality: take care of your credit, save and, most importantly, be realistic about what you can afford.
Indeed, politics aside, the key to home ownership is affordability, and affordability means having enough income to be able to afford your mortgage, taxes, upkeep and other things that everyone needs to live.
Beyond any additional pledges of assistance to making the path to home ownership smoother, having an economy and job market that people can rely on is critical.
That is an equal if not more important issue to keep an eye on as we head to the polls next month.
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