In a letter written to Finance Minister Jim Flaherty last week, Ron Olson, president of the Canadian Home Builders’ Association, pointed out some concerns he had with the new mortgage rules that are about to go into effect in just five days. While Mr. Olson makes it clear that those in his industry share Mr. Flaherty’s concerns about the housing market, they did not anticipate new mortgage rules, nor did they think they were necessary.
Mr. Olson wrote in his letter, “In recent weeks we have followed with interest your comments, and those made by the governor of the Bank of Canada, about the importance of housing market stability to Canada’s economy, and to the financial well-being of Canadians. We share this concern. We have also noted your concern about housing activity in certain Canadian markets. We had not, however, anticipated the need for additional tightening of mortgage rules at this time. Our field reports indicate that market activity and prices have been moderating.”
This, despite the fact that national home prices were up about 1.1 per cent in May; and in markets such as Toronto, one of the markets Mr. Flaherty said to be of utmost concern, Toronto mortgages went up on average of 5.2 per cent.
The letter went on to say that while the new home refinancing and amortization rules may help to cool those “certain” markets, they will also be very detrimental to housing markets that had “not yet recovered fully from the ‘Great Recession.'” and that for the CHBA, this “heightens our concern over the impact these changes may have on prices, and on the jobs and investment tied to housing activity.”
What concerned Mr. Olson the most though, as stated in his letter, was that, “The shorter maximum amortization period will reduce access to home ownership. For those who would otherwise have selected a 30-year amortization, it will take additional income each month to service new mortgage debt. Some potential new home buyers will no longer qualify, and this will disproportionately affect younger first-time home buyers, delaying their entry into home ownership investment.”
Mr. Olson ended his letter urging Mr. Flaherty to “closely monitor” different housing markets and the impact these new rules will have; and to consult with the housing industry as they are “in the best position to know how new housing consumers are being affected.”
But the president of the CHBA had more than just vague suggestions that Mr. Flaherty should meet with them. He ended his letter by saying, “Specifically, I would ask for your commitment to meet with us, by mid-October at the latest, to share information on current market conditions. We also ask that you stand prepared to take action should the results from these tighter mortgage rules be more dramatic or negative than anticipated.
“Consequently, the CHBA is calling upon the federal government to take immediate action to work with other levels of government to reduce government-imposed costs on new homes, including adjustments to federal GST thresholds for the New Housing Rebate. This is particularly important for young first-time homebuyers.”
