Housing affordability is a major problem many Canadians are faced with. In fact, 82 per cent of respondents in a recent Zoocasa survey agreed that housing affordability is a major issue that has negatively impacted the country.
As a result, according to a recent Zoocasa blog post, there has been pressure on the federal government to take action to improve affordability.
According to the blog post, the federal government will be announcing its 2019 budget tomorrow (March 19). There is a possibility that new measures will be announced that could help improve housing affordability.
Real estate associations, analysts, and other bodies, according to the blog post, have been proposing possible measures for the government to include in this budget that could help improve housing affordability.
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These proposed measures are as follows.
Reducing the Mortgage Stress Test
Implemented across the country on Jan. 1, 2018, the stress test was imposed to cool the housing market after prices skyrocketed during the winter of 2017.This test requires prospective homeowners to qualify for mortgages at higher rates than they’ll ultimately be paying).
As a result, some buyers may have had to downsize their desired home type, leave the market altogether, or explore their options with B and private lenders. This has had a notable effect on housing markets across Canada.
A number of real estate organizations, such as the Toronto Real Estate Board and Mortgage Professionals Canada, have called for the stress test percentage threshold to be reduced.
However, only a small percentage (15) of survey respondents indicated that reducing the stress test would be the most helpful measure in improving housing affordability.
Increasing the First-Time Home Buyers’ Tax Credit
A slightly higher percentage (28) of survey respondents revealed that increasing the First-Time Home Buyers’ Tax Credit amount would be the most helpful measure the government could introduce in the budget in regards to improving housing affordability.
According to the blog post, 30 per cent of renters agreed with this measure, while 26 per cent of homeowners agreed.
“Currently, first-time home buyers can get a credit valued at $750 when they file their income taxes,” reads the blog post.
Increasing the Maximum Mortgage Amortization
“Another measure that could trim housing costs for buyers would be to extend the length of their mortgage amortization – the total length of time it takes to pay off a mortgage – to 30 years for first-timers,” continues the blog post.
This 30-year option is currently only available to mortgage borrowers who put 20 per cent or more down on their home purchase. Those who put less than this down are required to pay their home financing back within 25 years.
Increasing this number; however, is a measure that not too many survey respondents agreed with. Only 10 per cent of respondents indicated this would be the most effective measure to improve housing affordability.
Regardless of these proposed measures, Canadians revealed that they are not overly optimistic about whether government intervention would improve housing affordability. Fifty-five per cent of survey respondents noted that housing affordability in Canada cannot be fixed with government policies alone.
“In fact, only 21 per cent said they feel confident that the government can improve the situation at all over the next five years,” reads the blog post.
Do you think these measures would be effective?
Graphic is courtesy of Zoocasa.