–Brief–
Canada Housing Market
4 minute starting point 📖 
4 questions to research 💭 
9 ideas to participate 💡 




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Background

Canadians are having a harder time than previous generations finding long-term places to live. 

  • For homeowners, the average price of a home is approximately ten times more than the average income. In the 1980s, the average price of a home was five times more than the average income. 
   














New rules for getting a mortgage were introduced by the government to control household debt and lower housing prices.

  • The new rules were announced by the Government of Canada and the Office of the Superintendent of Financial Institutions (OSFI) in October 2017 and became law in January 2018. ⚖️
 
  • OSFI is a federal government agency responsible for financial services, no matter which political party is in power. It is not a department like Health Canada or a part of a department like Statistics Canada. It is an independent office that reports to the federal Minister of Finance.
 
  • The office creates rules, laws, and plans for how financial institutions (banks, insurance companies, loan companies, and pension plans) do business.















The rules were created for financial institutions to follow when giving people mortgages.

  • A person who buys a house with a mortgage is called a borrower. 🏠  A financial institution that provides a mortgage is called a lender. 🏦
 
  • If a borrower contributes less than 20% of the cost of the home, the borrower gets mortgage insurance and is called an insured borrower. A borrower who contributes 20% or more does not need to get mortgage insurance and is called an uninsured borrower. 
 
  • To make sure borrowers can pay their mortgage when interest rates rise, OSFI tells lenders to put insured borrowers through a stress test. 
 
  • A stress test is not a literal test but a process where the insured borrower proves they can pay a mortgage under the current interest rate and could pay a mortgage under a higher interest rate.
 
  • Under the new mortgage rules, all borrowers have to take the test now. The new rules also called for higher mortgage insurance premiums, which is a fee paid by insured borrowers to receive insurance.















Interest rates have been low since the 2008 recession to encourage Canadians to spend money and stabilize the economy.

  • Interest is money we pay to have access to a loan to invest in something big like a house. An interest rate is the percentage we pay annually, and we pay it until the loan is paid back. 
 
  • Interest rates are determined by the Bank of Canada, which is the federal government’s bank. This bank is also called Canada’s central bank. Every country in the world has a central bank except a few.
   
  • Rates are calculated based on economic factors like the demand and supply of loans and the value of the Canadian dollar around the world.
 
  • When rates are low, more people buy property because having a mortgage is less expensive. When rates are high, this means the economy is strong because more people have jobs and money. 
 
  • The central bank increases the rate to control spending so that we don't spend too much.
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The Liberal federal government is offering affordable loans to some first-time home buyers.

  • The First-Time Home Buyer Incentive (FTHBI) assists with the cost of a down payment and lowers the cost of monthly mortgage payments through interest-free loans for a shared-equity mortgage.
 
  • A shared-equity mortgage is a mortgage where a lender (here, the government) and borrower share the profits or losses in the value of the home when it’s sold.
 
  • An interest-free loan is a loan that the borrower pays back to the lender, without having to pay interest.
   
  • The CMHC is a national government agency that helps the federal government manage Canada’s housing market. It is a Crown corporation, which means it is structured like a private business but owned by the government.
 
  • Eligible Canadians earn less than $120,000 (combined household income), have the minimum 5% amount required to apply for a mortgage, and select a home no more than $565,000.















The program is part of a national housing strategy created by the Liberal federal government to create affordable housing.

  • Affordable housing means the cost of owning a home is less than 30% of the gross (not taxed) income made by the household.
 
  • The strategy was announced in November 2017 and includes several plans to build new homes, repair old homes, give money to community housing organizations, and give money to housing development projects.
 
  • Some Canadians will receive priority access to the affordable homes. This includes seniors, people with disabilities, women and children escaping violence, Indigenous peoples, newcomers, people with mental health and addiction issues, the homeless, young adults, and veterans.
 
  • The strategy includes updates to existing plans like the Home Buyers’ Plan, where Canadians can withdraw $35,000 from an RRSP (previously $25,000) to buy a home without paying a penalty.














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What happened

The average price of a home decreased after the new mortgage rules went into effect, which cooled the market.
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  • When the average price of a home decreases, the housing market is cooling. This becomes a buyer’s market because houses are more affordable to buy. 
 
  • When the average price of a home increases, the housing market is heating. This becomes a seller’s market because houses are more valuable to sell.
 














Developers are building more apartments.

  • Developers are private businesses that invest, build, and own property like land, buildings, and homes.
 
  • Apartments are run by property-management companies that control how units are rented out. This gives renters predictability and security. 
 
  • Developers prefer to build condominiums because units can be sold to homebuyers before a building is finished. This gives developers money to finish building. 
 
  • Condominiums are independently purchased and rented out by individual owners who control how the unit is rented out. This gives renters less predictability and security.
  
  • In Ontario, the Conservative provincial government announced changes to several laws to increase and speed up housing supply, including building apartments. 
 
  • In cities, municipal governments have been making it easier for developers to build apartments, too. 









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Picture
Michael V., Vancouver | proactivecitizen.org









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What's next

The average price of a home is expected to continue to rise.

  • A poll of bank analysts, or professionals who analyze the economy for banks, predicts the average house price in Canada will ↗️ 1.8% in 2020. 📊 
 
  • At the same time, the stress test has become a bit less stressful with slightly lower mortgage rates which means borrowers can apply for slightly larger mortgages.















The central bank’s rates were slowly rising but stopped.

  • Plans to increase rates (to control spending) have been put on hold because of global trade conflicts between the United States and China and Great Britain and Europe. 
 
  • Another poll of bank analysts predicts the rates will stay the same until 2020, or possibly fall. 📊
  
  • The central bank will share its next update on October 30, 2019.















The first-time home-buyers incentive is accepting applications.
















All the while, Canadians are getting creative with housing.

   













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Questions to research

* What would happen if the government were less involved in housing and we were individually responsible for our spending and saving?

* Home ownership is a dream to be achieved in Canada but less so in other countries. Would we benefit from thinking more positively about renting?

* What is the government doing to monitor home purchases to better understand what’s driving up the cost of housing?

* If not in property, what are other ways Canadians can invest money to build wealth and savings?














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Ideas to participate

​💡Join, or contact, your local board of directors.




​💡Donate or buy household items with Habitat ReStore.  




💡Join a team of builders with Habitat for Humanity:



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💡Get involved on your own.




💡Start your own housing project.  




💡Join the National Housing Council.
  • The Government of Canada is looking for people to share opinions and help support the laws, rules, and plans shaping our housing story. (psst: apply before October 14.)





💡Find something else that works for you.
  • Ask your MP for advice by calling or sending an email (just type in your postal code to find them.)
  • We all have an MP, a member of parliament, who was elected to represent us in the government.​









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Peace is slowing eroding old barriers and quietly building new structures. 
–John F. Kennedy
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