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The Conservative and Liberal housing plans are surprisingly alike

One housing analyst described the Conservative policy as a stick approach, while the Liberal policy is just a carrot-shaped stick

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OTTAWA – With housing a top of mind issue for Canadians, both the Conservatives and Liberals have put detailed plans on the table to fix the crisis. But despite their heated rhetoric, the plans are more similar than you might think.

Housing prices have soared in Canada over the Trudeau government’s term in office, which, combined with now high interest rates, has pushed the cost of home ownership out of reach for many people.

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Statistics Canada numbers from 2021 show the number of people aged 25 to 29 who own their home fell 10 percentage points between 2011 and 2021. An Ipsos poll conducted this spring found that 63 per cent of people who don’t currently own a home have given up on the idea that they ever will.

Rents have also skyrocketed, especially since the pandemic, with monthly prices climbing eight per cent in just the last year, according to rentals.ca, which tracks the data. Even the cost of a single room is over $1,000 in some cities.

Conservative Leader Pierre Poilievre released a 15-minute documentary on the topic and put a private member’s bill, the “Building Homes Not Bureaucracy Act,” before the House of Commons. He said in his documentary that the situation needs to be addressed.

“An entire generation of youth now says they will never be able to own a home. That is not normal in Canada,” he said.

Poilievre’s housing plan includes a GST rebate for the construction of purpose-built rental homes, just like the proposal the Liberals recently passed through the House of Commons, but with a key difference.

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The Conservative proposal would only give that rebate to rental apartments where the median rent is below market value, while the Liberal proposal gives the rebate to all purpose-built rental apartments.

Housing Minister Sean Fraser said he considered the Conservative approach, but found it wouldn’t do enough and would create more bureaucracy.

“If you eliminate essentially most new middle class apartments from the equation, you’re not going to actually see a supply of those new units,” he said. “When you actually address supply more broadly, you see a cascade effect through the economy.”

The National Post asked for an interview with Poilievre or his party’s housing critic, but neither was made available. Senior Conservatives speaking on background because they were not authorized to speak publicly said the policy was written to avoid giving a tax break to luxury rental units and focus instead on much needed affordable housing.

They argued the data needed to implement such a policy is readily available and wouldn’t create new bureaucracy.

Mike Moffatt, a housing expert and director at the Smart Prosperity Institute who has advised the federal Liberals, said limiting the GST rebate as the Conservatives propose would be difficult and ultimately take away an incentive for much needed rental housing.

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“I think it would be an administrative nightmare and I think it’s one of the reasons why the federal government didn’t go that route,” he said. “It would be great work for a bunch of tax lawyers, but I don’t think it would get much built.”

He said most luxury rentals are condominiums that are put on the rental market and any purpose-built luxury rentals are a price worth paying to get much more overall rental construction.

Moffatt advised the government to build two million new rental units over the next decade, arguing that more rental units would bring down prices across the spectrum.

“You’re seeing investors buy up high numbers of single family homes and turn them into student rentals, so if you fix the rental side it helps fix the ownership side,” he said.

The other similarity between the Conservative and Liberal housing plans is the focus on municipalities delaying or limiting construction, with both parties making plans to get municipalities across the country to build more homes.

Poilievre’s plan targets 22 municipalities across the country where home prices are more than five times the average income in those cities. He argues planning and zoning rules are the work of gatekeepers preventing more housing from being built. Those cities would have to rapidly scale up the number of new houses completed every year in their communities.

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Starting in 2025, they would have to build 15 per cent more housing every year or risk a cutback in the federal grant they receive. Municipalities who exceed that 15 per cent target would get a bonus with a $100 million available for bonuses. Over the course of five years, a municipality would have to more than double the amount of housing being built in their communities.

It also demands municipalities remove policies that stand in the way of construction and build apartments and other high density projects around transit stations, which would have to be occupied before cities receive transit money.

Moffatt said the challenge of that proposal is that municipalities aren’t the only barrier to getting a house built, sold or occupied.

“If builders aren’t building because interest rates are too high, well, there’s not much a municipality can do about that,” he said.

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Many Canadian cities have long delays for building permits or zoning changes, but in many cases they also have thousands of units that have been approved but never built. Moffatt said while Poilievre’s approach puts all the onus on municipalities, including for problems they might not be responsible for, it also focuses on results and prevents cities and towns from stopping more home construction.

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“The Conservative plan recognizes that you can change all kinds of rules, but if a municipality is really dead set against new housing starts, they’ll find a way to block them.”

The Liberal plan by contrast is centred in $4 billion housing accelerator fund that gives municipalities money if they commit to certain changes. Fraser has demanded, for example, that cities allow up to four units to be built on single-family home lots in communities and allow for more high-rise development, especially around transit stations.

The Liberals have signed 14 deals with municipalities along those lines, including Vancouver, Mississauga, Toronto and Calgary. Fraser said he believes the Liberal policy strikes a balance by making municipalities responsible for their part of the process.

“It’s actually incentivizing behaviour within the control of municipalities. In order to inspire the kind of change that we want to see,” he said.

Any municipality in Canada can apply for the housing accelerator fund and Fraser argues the Conservative plan is too narrow with fewer cities part of the deal and much less on the table.

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“If you only include 22 municipalities, the vast majority of Canadian communities are ineligible,” he said. “Not only is there less money on the table, not only does it apply to such a small number of communities, but it actually doesn’t incentivize the behaviour change we want to see.”

Both parties are also offering other changes.

The Liberals have promised billions for the construction of new social housing and the Conservatives are promising to tie bonuses at the Canada Mortgage and Housing Corporation to housing starts.

Steve Lafleur, a housing policy analyst, said he doesn’t actually see a huge difference between the two proposals, with the Conservatives promising to take money away from municipalities and the Liberals dangling new funding to change how cities view housing.

“There’s not that much difference between withholding current infrastructure funding and putting out a pot of money and saying if you want you can have this, but if you don’t give us the right deal or if you’re not gonna strike concessions we will withhold it.”

Lafleur said if the Conservative policy is a stick approach, the Liberal one is a carrot-shaped stick.

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Fraser has released public letters with mayors about what specifically he wants cities to do to get the housing funding. Lafleur said in some ways the Liberal minister is clearing out the anti-housing policies in municipalities that Poilievre will want to target in government.

“If you think that Pierre Poilievre is going to be Prime Minister in 2025, you could kind of joke that Sean Fraser is effectively doing his work for him right now.”

Lafleur said neither plan is going to have an immediate impact on the housing situation Canadians face today.

“A lot of the reforms right now, unfortunately, are going to take time to filter through, partially because any policy change takes multiple years because it takes multiple years to build,” he said.

Lafleur said ultimately much of this is out of the hands of the federal government, which is why both parties have similar proposals and want to use the federal purse to change behaviour.

“These are large sums of money that they do have control over so they can, even if they can’t directly do much, incentivize municipalities by making them a deal they can’t refuse.”

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