Rising real estate prices are forcing middle-class Canadians to reevaluate their dreams of homeownership. A rural to urban migration pattern has caused an acute housing shortage in Canadian cities like Vancouver and Toronto. The influx of people causes rent to skyrocket and limits the renter’s ability to save for private property. To help alleviate this alarming trend and create opportunities for its middle-class citizens, Canada is developing drastic measures in the form of the following land and tax incentives.
A model submitted by the group Creative Housing Society proposes that cities provide developers with free land in exchange for the construction of a housing complex upon it. The complex must be affordable, meaning that residents would spend no more than 30% of their household income on housing costs prior to taxes, and maintained perpetually. Ideally, they would accommodate citizens earning between $40,000 and $100,000 annually. The proposal is under consideration, but it remains unclear as to whether property developers would be able to meet the excessive demand— 50,000 affordable rental units over a span of ten years.
The Creative Housing Society also seeks to address rising interest rates. Working with the Canadian Mortgage and Housing Corporation, the group hopes to garner a deal that would freeze interest rates on mortgages at the current lending rate. The freeze would last approximately 10 years and would be primarily funded by private institutional lenders.
To counter the increasing demand of houses, the Canadian government has developed multiple tax measures, which will ensure that middle-class individuals are in a position to acquire their own home within a short period, and reduce the increasing demand of new housing units in the country. Most materials required for new construction are now tax-free, significantly lowering market prices for both individual buyers and real estate agents.
The three strategies are still under implementation but are expected to relieve the current pressure crippling the middle-class as long as they are executed in an efficient and timely manner. Some officials have expressed concern over the size and scope of the current shortage.
“You need to add a significant amount of housing to even behind to respond to the demand and we’re so far behind in this area that it’s really hard to catch up,” says Creative Housing Chief Executive Officer Jessica Keesmaat.
The plan proposed by the Creative Housing Society is not the first to attempt to address this issue. Others have exhibited little to no success.