Photo: Steve Slaby/Flickr

There weren’t many surprises on election night as the Liberals rolled over the Conservatives to form a diminished but stable minority government. Sure, Scheer’s Conservatives had a poorer than expected showing, but the overall result still fell within the range of outcomes that were considered fairly likely.

Now, with at least a couple more years of Trudeau’s Liberals in power, there is undoubtedly an appetite to pick up where they left off on tackling the Canadian housing market’s ongoing affordability issues.

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Where they choose to start comes down to how the Liberals’ campaign promises around housing influence their policymaking and whether they will continue to focus on demand side measures (ie. creating or expanding programs that help homebuyers) or shift to include more aggressive demand side measures (ie. building more homes) in their approach to resolving persistent housing affordability woes that have plagued major markets across the country. It also remains to be seen how the Liberals will work with the NDP, whose support they need to hit the 170 seat threshold in the House of Commons, to ensure their legislative agenda can be pushed through.

TD senior economist Brian DePratto zeroed in on one Liberal election campaign promise he believes could do more harm than good when it comes to housing affordability, especially in the challenging Toronto and Vancouver markets.

The Liberals first introduced their First-Time Homebuyers’ Incentive in 2019. The shared-equity mortgage program sees the federal government contribute up to 10 percent towards the purchase of a new home in exchange for a corresponding equity stake in the property. To participate, a first-time homebuyer household’s income can’t exceed $120,000.

Now the Liberals want to expand the program by increasing the qualifying household income level and mortgage size. The program had been critiqued for being essentially useless for homebuyers in Toronto and Vancouver, where average home prices often exceed the maximum mortgage participating homebuyers were permitted to take on through the scheme.

DePratto believes this demand-side move will likely “add further fuel to prices at a time when the market has already been gaining strength.”

“[P]reliminary modelling suggests that, together with the existing programs, national home sales and prices could be driven 2%-3% higher over the next few years than would otherwise be the case,” he writes in a note this week.

DePratto also flags the fact that both the NDP and Conservatives floated raising the maximum mortgage amortization period back to 30 years, up from 25 years where it’s been held since 2012. While the Liberals did not entertain this during the 2019 campaign — in fact they roasted the Conservatives for even suggesting it — there very well could be more of an appetite to pursue such a measure with the party likely relying on NDP support to push legislation through. For their part, the NDP promised to raise the amortization period only for first-time buyers purchasing entry-level homes. The Conservative suggestion that the Liberals took issue with was more broad.

But regardless of which path the government pursues, DePratto’s primary concern is the effect both initiatives would have on home prices, especially in Toronto and Vancouver, without a corresponding boost to housing supply.

“Should these measures come to pass, some further action on the supply side will be warranted to help address longer-term affordability challenges,” he writes.

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