TD economists weigh in on the federal government's recently launched "Canada's Housing Plan," acknowledging its ambition while outlining potential roadblocks.
The plan sets a target of 3.87 million new homes constructed by 2031. This translates to record-high building activity for several years, according to TD. However, TD economists also point out potential hurdles that could limit the plan's effectiveness.
Interest Rates, Workers, and Cooperation
TD highlights several factors that could constrain the supply of new homes:
- Interest Rates: Although future rate cuts are anticipated, they might not be enough to offset rising construction costs.
- Worker Shortages: The construction industry is already facing a labor crunch, with competition for skilled workers fierce.
- Intergovernmental Cooperation: Several measures rely on collaboration between federal and provincial governments, potentially leading to delays.
Positive Signs for Renters
The plan includes measures aimed specifically at bolstering rental stock:
- Rental Construction Gets a Boost: Programs like the Apartment Construction Loan Program will see increased funding.
- Tax Breaks for Rental Investment: Faster tax write-offs will incentivize building and owning rental properties.
- Focus on Long-Term Rentals: The plan prioritizes long-term rentals over short-term accommodations like AirBnB.
Limited Impact Expected
Measures intended to make homeownership more affordable are unlikely to have a significant impact, according to TD:
- Extended Amortization Periods: This benefit is only available to a narrow group of buyers.
- Higher RRSP Withdrawal Limits: This might not significantly alter buyer behavior.
- Restrictions on Foreign Ownership: This targets a market segment with minimal impact on overall affordability.
TD's Take
While the plan holds promise for increasing housing supply, particularly for renters, TD economists highlight challenges posed by worker shortages, high interest rates, and the need for seamless cooperation between government levels.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
