Jul. 1, 2022

Governments shoulder the blame for housing prices

The Trudeau/Singh cabal is assuring us it can solve a housing crisis created by federal and provincial governance ineptness.

The federal government contributes to high housing prices by insuring mortgages through the Canada Mortgage and Housing Corporation (CMHC). Qualified buyers can purchase a home with as little as 5% equity provided that they meet certain regulations.

It is a scam. The home purchaser is required to pay a premium for the insurance, but the insurance protects the lender, or mortgagor, not the homeowner. Banks and other lenders like the plan because if a homeowner fails to make mortgage payments, the bank can recover its losses from the CMHC.

Home buyers will naturally purchase the best and biggest house with their 5% in savings (or family financing) will buy. Since qualification is based in part on income, the higher the family income, the more expensive the house. Home sale prices are market-driven. As long as there are competing buyers, prices go up.

Provincial governments contribute with a bureaucratic nightmare of property development regulations and restrictions. Instead of requiring that a new housing development include 10% low-cost homes, regulations require that all homes meet artificial standards to keep average prices similar.

The downside is that as prices rise, the pool of eligible buyers at the bottom end of the income scale diminishes. A buyer may qualify for a $250,000 home mortgage, but in the price range, demand far exceeds supply.

The primary funding for municipalities, which includes cities, is from land taxes. Efforts to introduce affordable housing units in the mix reduce the total value which results in a higher ongoing land tax component. The owners of non-affordable houses wind up subsidizing the affordable units.     

Following the federal conservative party leadership race, I note that the front-runners are all on the affordable housing kick. That led to the headline, which is a quote from Casey Stengel, when he managed the New York Mets during a dismal first season in 1962.

Politics, like baseball, has rules. The management and sales of lands within the province is an exclusive constitutional provincial jurisdiction. The federal government has no jurisdiction to interfere.

When the federal government attempts to deal directly with cities or other municipalities, it is off its reservation and acting without constitutional authority.

It is not true that the federal government is in charge of everything and can involve itself in repairing or reconfiguring anything it turns its attention to.

Affordable housing is a provincial jurisdiction and problem that is outside the jurisdiction of parliament.

Our major cities are unaffordable. That is due to a combination of inattention and bad planning. Housing prices in Toronto and Vancouver are not and must not become a national issue. The cities and provinces have to figure out a solution without using federal funds. It is not up to taxpayers across Canada to fund solutions for municipal failures to plan and create an affordable and pleasant environment for big-city residents. Federal funding for affordable housing means that a fixed-income pensioner living in a rural area winds up subsidizing a big-city homeowner which is unacceptable.

Federal political parties don’t give a hoot about the welfare of city residents. They are trolling for votes in urban areas by making promises they can’t keep and diverting attention from federal issues they are failing to deal with.

I noted a receent article stating that the Bank of Canada was considering involvement in cryptocurrencies. The federal government has exclusive jurisdiction over; (1) currency and coinage, (2) bills of exchange and promissory notes; and (3) legal tender. Without creating a law making cryptocurrencies legal tender, they are unlawful in Canada no matter what the Bank of Canada may think or do.

We must not allow governments to continue to ignore the constitution, which is the primary law and rule-book for democratic governance in Canada. Governments that ignore their constitutional duties, limitations and obligations are subversive enemies of the nation and its people.