Policy Pulse: The most interesting part of the Conservative housing plan is buried deep in the platform

Conservative Leader Erin O'Toole reveals his party's recovery plan on August 16, 2021 in Ottawa. Ryan Remiorz/The Canadian Press.

Welcome to The Hub’s Federal Election 2021 Policy Pulse, where we’ll be tracking all the policy announcements from the major parties, with instant analysis from our crew of experts.

With the election scheduled for Sept. 20, we’ll be monitoring 36 days worth of policy ideas, so watch out each morning for the day’s live blog where we’ll be tracking every announcement as it happens.

5:00 p.m. — Daily recap: Campaigns focus on housing and corruption on Day 4

Conservative leader Erin O’Toole promoted his plan to tighten lobbying, ethics and conflict of interest rules and NDP leader Jagmeet Singh turned the focus onto housing in Day 4 of the campaign. Here’s the rundown, with more news and analysis below.

  • Speaking in Quebec City, O’Toole said he would raise the maximum fine for ethics violations from $500 to $50,000 and close loopholes in the lobbying process.
  • In Burnaby this morning, Singh promised to implement a 20 percent foreign buyers tax on the sale home to people who are not Canadian citizens and also pledged to build half a million affordable housing units over the next 10 years.
  • Inflation numbers came in higher than expected Wednesday morning, allowing the opposition leaders to tee off on the cost of living.

4:00 p.m. — The most interesting part of the Conservative housing plan is buried deep in the platform

The Hub contributor Ben Woodfinden takes a look at the Conservative housing plan:

There’s a lot to digest in the Conservative platform, but one standout item is the party’s housing promises. It presents a direct contrast to the NDP housing promises announced today and examined below on this live blog.

Pro-housing advocates have been screaming for years that the best way to solve this crisis is with a supply side solution. We simply need to build more housing.

Politicians have preferred to focus on the demand side of the equation, but pumping more capital into an already over-juiced market, with things like the first time homebuyers credit, just further increases prices.

To their credit, the Conservatives haven’t done that and have a lot to say about supply side solutions.

They’ve promised a plan that will build one million homes in the next three years. They bury the most significant way the federal government can help do that in a subpoint, but its still significant.

They say that they will “require municipalities receiving federal funding for public transit to increase density near the funded transit.” This, more than anything else, can help move the needle on housing supply.

3:00 p.m. — Parliament’s dissolution ends the AG’s lawsuit against the Speaker

The Hub contributor Gerard Kennedy reminds us about an important lawsuit against the Speaker of the House of Commons:

Last month, I explained the implications of the Attorney General of Canada’s lawsuit against the Speaker of the House of Commons. I argued that the lawsuit was inappropriate and the Federal Court should promptly dismiss it, though Parliament ignoring a court decision would nonetheless be deeply problematic.

Yesterday, the legal saga came to an end as the Attorney General discontinued his case. Parliament’s dissolution rendered it moot.

This is entirely appropriate. The Speaker’s order that the Attorney General challenged has no effect now given Parliament’s dissolution. Moreover, courts should not be using their scarce resources to decide moot matters, save in exceptional circumstances.

Having said that, one might perceive that the proceeding was brought to avoid compliance with the Speaker’s order pending Parliament’s dissolution. Hopefully, this is not the case. Attorney General David Lametti has asserted that he played no part in the decision to bring the lawsuit. The Attorney General personally is rarely involved in making litigation decisions undertaken by his office.

But the perception that inappropriate litigation has been brought for strategic purposes can be as great a problem as the reality.

Even though the case was proceeding promptly, the short delay in resolving it was consequential — there will now never be compliance with a ruling of the Speaker of the House of Commons.

2:30 p.m. — Do real estate taxes on foreign buyers actually work?

The Hub’s content editor L. Graeme Smith looks at the research on foreign buyers taxes in real estate:

In a report for the University of Toronto, Josh Gordon concludes that foreign ownership is indeed exacerbating the problem of surging prices in two of the most expensive real estate markets in the country, Vancouver and Toronto.

Foreign ownership is decoupling the housing market from the labour market and elevating costs beyond what local incomes can afford, he writes. 

In response, both markets introduced new real estate transfer taxes that targeted foreign buyers. Vancouver implemented its Foreign Buyers Tax in 2016 at a rate of 15 percent, and later increased it to 20 percent in 2018. 

Toronto followed suit with a similar measure, the Non-Resident Speculation Tax, at 15 percent in 2017.

The taxes affected housing prices and the number of transactions.

In research for the University of Ottawa, Zachary Thurston found Vancouver’s tax initially decreased the monthly percentage change in housing prices by 1.73 percentage points, and, then later by 1.43 percentage points. 

It also decreased monthly transactions by 24 percent, and later by 30 percent.

He found an equivalent effect in Toronto, with decreased monthly transactions estimated at 38 percent. 

In terms of prices, he found that the Foreign Buyers Tax and the Non-Resident Speculation Tax reduced the monthly percentage change in prices of single-family homes by 2.40 and 4.21 percentage points respectively.

It remains to be seen if similar policies on a national scale would have the same effect, but these local effects are evident in two of Canada’s largest cities.

2:00 p.m. — The difference between ‘housing affordability’ and ‘affordable housing,’ and why it matters

The Hub contributor Chris Spoke untangles some key housing market terms:

We’re starting to hear more about housing and housing policy from all federal parties in the election campaign.

To make sense of their talking points and proposals, it’s important that we distinguish between “affordable housing” and “housing affordability.” These terms might sound like they refer to the same thing, but they don’t.

“Affordable housing” generally refers to housing that is priced below the market rate, whether for sale or for rent. This can be housing that is supplied by the private sector and subsidized by the government, or housing that is supplied directly by the government (for example, social housing).

“Affordable housing” is generally made available only to lower income households that qualify through an application process, a lottery, or some combination of the two.

“Housing affordability” generally refers to people’s ability to afford housing. The larger the group of people that can afford housing, the more affordable it is.

For example, more households can afford to pay $2,000 than $3,000 per month to rent a 2-bedroom apartment. When it comes to “housing affordability,” the less expensive, the better. That’s something Canada has been struggling with recently.

1:30 p.m. — NDP housing plan is very ambitious and the price tag could be high

The Hub’s editor-at-large Sean Speer examines today’s NDP housing announcement:

The NDP’s housing policy announcement comes the same day that Statistics Canada reports that its homeowners’ replacement cost index (which aims to measure the cost of new homes) increased by 13.8 percent year-over-year in July, which is the largest annual increase since 1987.

The question, of course, is: will the NDP’s proposals help to address rising unaffordability challenges in many Canadian cities?

The first proposal, a 20-percent tax on the sale of homes to people who are not Canadian citizens or permanent residents, aims to address perceived concerns about demand-driven increases to housing costs. This policy would essentially nationalize similar policies in place in parts of British Columbia and Ontario. It’s difficult to judge the efficacy of these provincial policies at this stage or to assess what the effects may be when implemented nationally.

Although most policy observers believe that a lack of housing supply is the main driver of our housing unaffordability challenges, there may indeed be a case that a combination of the high concentration of immigration in small number of major cities and even foreign speculation is contributing to the problem.

A national foreign buyers tax may help on the margins with the second issue. But addressing the first one would require new and different thinking about Canadian immigration policy which is not part of the NDP’s proposal.

Its second proposal to “create at least 500,000 units of quality, affordable housing” targets the supply-side of the housing market — though it prioritizes social housing part units rather than the market-based housing units.

A commitment to build half a million homes (including 250,000 in the next five years alone) is highly ambitious relative to the current National Housing Strategy which only aims for “up to 100,000 new housing units and 300,000 repaired or renewed housing units” over a ten-year period.

The NDP proposal is presently un-costed — its individual and overall platform costs are to follow — but if the National Housing Strategy’s 100,000 new homes will cost as much as $40 billion, then one can assume that five times the number of new homes will presumably cost a great deal more.

1:00 p.m. — Where the parties stand on foreign buyers in real estate

With NDP leader Jagmeet Singh pledging to implement a 20 percent foreign buyer’s tax, it’s worth looking at where the other two major parties stand on the issue.

In the platform released on Monday, Erin O’Toole’s Conservatives promised to ban foreign investors who do not live in Canada from buying homes for a two-year period. After two years, the potential buyer’s status will be reviewed.

The Conservatives say they will encourage foreign investment in affordable “purpose-built rental housing.”

In the spring budget, the Liberals brought in a one percent national tax on vacant homes owned by non-Canadians who do not live in Canada, which will come into effect on Jan 1, 2022.

12:00 p.m. — NDP promises 20 percent foreign buyers tax on home sales

NDP leader Jagmeet Singh was in Burnaby today promising to levy a 20 percent foreign buyers tax on the sale of homes to people who are not Canadian citizens or permanent residents.

Singh also said an NDP government would build half a million affordable housing units over the next 10 years.

11:25 a.m. — Inflation numbers are being driven by shelter, transportation and food prices

11:00 a.m. — Based on their promises, the parties are effectively ignoring the inflation bogeyman

The Hub contributor Rob Leone examines how today’s inflation numbers will play out on the campaign trail:

Statistics Canada released its monthly Consumer Price Index this morning. The CPI measures the average change in prices over time that consumers pay for certain goods. It is the measure that is mostly widely used to measure inflation.

The July 2021 figure is 3.7 percent over the July 2020 figure. Given that the Bank of Canada has an inflation target of two percent with a target range of one to three percent, the July figure is considered high and outside the target range, which is a concern.

How the inflation data plays out on the campaign trail remains to be seen. All the parties are proposing policies that will further put pressure on consumer demand for goods. The expected tax credits that are being sold to make life more affordable for things like energy, homes, and mobile phone plans, as well as massive spending on things like infrastructure that will only fuel a red-hot construction sector, suggests that parties are effectively ignoring the inflation bogeyman.

Complicating the inflation question is how a fourth wave of the COVID-19 pandemic will affect economic output and consumer spending. If the Bank of Canada needs to raise interest rates to control consumer demand, any expected personal benefits to announced tax credits over the next 30 days could be erased by increased borrowing costs.

9:00 a.m. — O’Toole promises new anti-corruption law

Conservative leader Erin O’Toole was in Quebec City this morning to propose an anti-corruption act that would “close loopholes in lobbying,” increase transparency and significantly hike the penalties for ethical violations.

O’Toole said the new rules were necessary in the wake of the three ethics investigations conducted during Liberal leader Justin Trudeau’s tenure. O’Toole argued that the current penalties were far too low to deter ethical behaviour and proposed a maximum fine of $50,000 dollars that would apply to all ethical violations.

The new law would also ensure cabinet confidence won’t be used to protect “the high-placed friends” of elected officials, said O’Toole.

O’Toole said his plan was reminiscent of the Accountability Act, which was enacted by Stephen Harper’s Conservative government after beating a Liberal Party that was reeling from the sponsorship scandal.

7:00 a.m. — Today’s events for the party leaders

Conservative leader Erin O’Toole will be in Quebec City to make an announcement at 9 a.m. ET.

NDP leader Jagmeet Singh will make a housing announcement in Coquitlam, British Columbia at 9 a.m. local time (noon ET).

Liberal leader Justin Trudeau will make an announcement in Vancouver at 9 a.m. local time (noon ET).

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Why are politicians always concerned with a “maximum” penalty? What they need is a $50,000 “minimum” penalty

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