Liberals raiding CMHC

Since being elected in 2015, the Liberal government has made numerous changes to Canadian Mortgage and Housing Corporation (CMHC) policy that has made it more difficult to obtain a mortgage.

These changes have also made re-financing an existing mortgage more expensive.

Generally, the Liberal government has reasoned these changes are intended to slow down the Vancouver and Toronto real estate markets and lower overall consumer debt.

Why would the government want to slow down the real estate market in Toronto and Vancouver? The theory is if fewer buyers can qualify to purchase homes, the demand will decrease and prices will potentially drop as a result and by extension increase affordability in these markets. 

The challenge with this particular approach is that CMHC policies are very much one size fits all.

Although Vancouver and Toronto are the primary targets of these new restrictions, the rest of Canada is also subject to them and as a result many regions of Canada may be adversely impacted.

This was feedback I heard extensively during hearings at the Finance Committee back in February when these changes were heavily scrutinized.

One stakeholder pointed out that while the Liberals crack down on debt taken on for home ownership, they overlook the consumer debt on credit cards, third party loan outfits and elsewhere.

The difference is that with home ownership debt, there can be equity created and much lower interest costs in contrast to credit card debt. It is a valid point.

More recently, the government quietly announced that it will raid CMHC to the tune of $4 billion over the next two years. This announcement received very little media attention and that is disappointing.

For those who have mortgages with a down payment less than 20 per cent, the CMHC fees required to provide insurance on that mortgage is substantial.

Rather than reduce CMHC fees to make them more affordable or refund the surplus to those who have paid them, the Liberals are instead using CMHC as cash grab contrary to the purpose of this organization.

Rather than just oppose, I would like to propose an alternative.

Instead of taking $4 billion from CMHC to go into general revenue, why not ioffer a GST exemption on new housing up to $750,000, similar to what the B.C. government has done with the Property Purchase Tax exemption on new housing.

This policy would reduce the costs of home ownership by tens of thousands of dollars.

At the same time, this policy would help stimulate economic activity through increased construction, would help increase housing supply and would help Canada’s value added wood producers hit hard by the current softwood lumber dispute.

My question this week:

Instead of a $4 billion cash grab from CMHC, would you support those same funds supporting a GST rebate on new housing?

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.