Starting February 15, the minimum down payment for insured homes over $500,000 will increase.
“(Finance) Minister Morneau made it clear that the measure was principally aimed at the ‘elevated’ housing prices in the Vancouver and Toronto areas. Yet, the new rules may not slow the price escalation in the two markets,” Wendell Cox, chair of housing and affordability for the right-leaning Frontier Centre for Public Policy, writes in a position piece entitled Canada’s New Federal Mortgage Rules: Right Diagnosis, Wrong Medicine?.
Cox says the new rules don’t address the underlying issues currently plaguing the Canadian housing market, arguing house prices in Vancouver and Toronto will continue to rise faster than household incomes.
He argues the government should be addressing skyrocketing land-use costs. That would address the issue at the builder level and not the individual buyer level.
He notes that building a house in Vancouver costs a mere 25% more than it does in Edmonton and yet homes costs 300% more on the west coast.
“The difference is land values, which have been pushed up in Vancouver by land use regulations that make building detached housing exceedingly expensive,” Cox writes. Much of the problem can be tied to provincial and metropolitan land use policies.
“Despite Ottawa’s rightful concerns and good intentions, the solution is in Vancouver and Toronto, not Ottawa.”
The government's newest down payment requirements are about to go into effect, and one advocacy group says the pending rule change miss the mark.