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Federal budget misses the mark on housing, says SFU finance professor

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The federal government’s $10 billion injection aimed at lowering the price of a home in BC and across Canada has missed the mark, says a Simon Fraser University finance professor.

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“The only long-term way to build more homes and improve affordability is to make it easier to build,” said Andrey Pavlov. “At the moment there are certainly enough people interested in building houses. The bottleneck isn’t money for housing, it’s waiting for city approval and inspection and a confusing provincial building code.”

On Thursday, federal Treasury Secretary Chrystia Freeland announced a budget that included a $4 billion Housing Accelerator Fund, administered by the Canada Mortgage Housing Corp., aimed at building 100,000 homes over the next five years.

Freeland also earmarked $1.5 billion over two years to create 6,000 new affordable units — at least 25 percent of which are focused on women-oriented housing projects — and $150 million over five years to change building codes to focus on low-carbon. construction projects .

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Home prices in BC have risen 50 percent in parts of the province over the past two years, reflecting record low interest rates, high immigration levels and relatively low construction levels.

However, it is the third element that the government should focus on, Pavlov said, and it should be done at the municipal and provincial levels at the behest of the federal government. Pavlov said that delays in permitting and heavy building regulations pinned down apartment development and market rent in Metro Vancouver.

“What we need is to make building easier,” he said. “The approval requirements should focus on two things. The appearance and external dimensions of the building, and the health and safety of the building. Projects need to be reviewed much faster and built much faster.

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“Historically, housing has been a very attractive investment, not just in BC, but around the world. Buying it is an asset that hopefully over time you will appreciate living in it too. Making housing affordable is worth the effort, but the only way to get there is to build more. Like much more.”

Paul Kershaw, director of UBC’s School of Population and Public Health, said the $10 billion proposed for housing was a small amount given that $85 billion was earmarked for retirement income. He said the budget “fails to recognize our country’s addiction to high and rising house prices” as the root cause of the affordability crisis.

“The wealth many homeowners gain from skyrocketing prices is the unspoken downside of unaffordability,” Kershaw said.

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The federal government also plans to ban non-Canadians from buying homes in Canada for two years. Refugees, international students on their way to permanent residence and persons with work permits would be exempted. The government said it would continue to monitor the impact of foreign money on housing costs across the country and is prepared to tighten the ban if necessary.

By 2023, the federal government has also promised a tax-free First Home Savings Account that will allow first-time home buyers to save up to $40,000 toward a home. It works like an RRSP where the contributions are a tax deduction, but when you withdraw the money, you pay no tax on it.

The government expects the plan to cost $725 million in lost taxes over five years.

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Beyond these measures, credit for first-time homebuyers will double to $10,000, and from May 7, the government will charge GST to people who buy real estate and put it back on the market within 12 months.

The government is also drafting a Bill of Rights for home buyers to ensure the legal right to home inspection and end blind bidding.

In a statement, Greater Vancouver’s Real Estate Board chairman Daniel John said the group wanted the government to be cautious about policies that engaged the government in the sale of private property.

“Interventions like that should be done rarely, carefully and with the rights of all parties in mind,” John said.

— With files from The Financial Post

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