Liberals offering up housing focused fall economic statement

New measures to include stress test tweaks, $15 billion in apartment construction loans and an AirBNB crackdown

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OTTAWA — The Liberals’ fall economic statement will have a significant housing focus, the National Post has learned, with low-cost loans for apartment construction, tax measures to discourage short-term rentals, and new rules for how banks deal with people already struggling with their mortgage.

Finance Minister Chrystia Freeland will deliver the Fall Economic Statement Tuesday afternoon as the Liberals face polls showing the party would be easily swept from office in an election against Conservative leader Pierre Poilievre, with cost of living and housing affordability consistently ranking as top issues for Canadians.

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A senior government official outlined to the National Post what to expect in the statement, but spoke on a not for attribution basis because they were not authorized to speak publicly. They said the suite of housing measures are all about “supply, supply, supply,” as they hope to lower housing costs across the country.

The government will unveil a “Canada Mortgage Charter,” with a new set of rules for federally regulated mortgage lenders. It will require banks and mortgage holders to work with people who are falling behind on their payments, including offering longer amortization rates.

Banks will also be prohibited from charging any relief fees for offering such help, and will have to warn mortgage holders about pending renewals four to six months in advance of a renewal, giving customers time to shop around.

The charter will also make a slight change to the current “stress test” regime. People seeking mortgages today face a stress test forcing lenders to ensure borrowers could afford their mortgage if rates were to be two per cent higher than they are currently. When homeowners renew their mortgage, they face the same test unless they remain with their existing bank. Tuesday’s update will remove the stress requirement for mortgage renewals, even if someone is switching banks.

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Dan Eisner, founder and CEO of True North Mortgage, said much of what is in the proposed charter won’t be different from standard industry practice now, but the change to the stress test rules around renewals could make a significant difference.

“That is not insignificant; that does open up the door for banks, forcing the banks to be more competitive on renewals.”

Eisner said banks today can keep people locked in, because some homeowners would struggle to pass a stress test when they renew their mortgage.

“They’re going to up your rate because you can’t go anywhere else. That’s a real fear, especially with the rates much higher,” he said.

He said most people coming up for renewal are in decent fiscal shape, because their incomes have likely risen and they have paid down a significant part of the principal, but being able to shop more easily for new rates would help.

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The senior government official also confirmed previous media reports that the government will prevent people who own short-term rentals, like AirBNBs, from deducting expenses if they are not following municipal rules that either ban or license the short-term stays.

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They said the government expects it will push short-term rental owners to either sell their units or put them up as a month-to-month rental.

“It will change the equation for short-term rentals,” the source said.

The government is also expected to announce $15 billion in low-cost loans for apartment developers, which they estimate will get 30,000 new units built.

The source said the update would be a smaller document with a focus on housing and affordability measures. They said the government was aware growth was slowing down and inflation was cooling, and the document would not be like the big spending budgets the government engaged in during the pandemic, and the government would be more restrained.

“We are not in the depths of the pandemic any more.”

Poilievre issued three demands ahead of Tuesday’s budget. He wants the government to cancel coming carbon-tax increases, balance the federal budget, and announce a plan that will build more houses.

He said the government’s plan to date has only created more photo-ops instead of more housing. He argued the Liberals’ spending has done serious economic damage.

“After eight years of Trudeau to a record smashing two million Canadians are forced to food banks lined up around the block in ways we have not seen since the Great Depression.”

Twitter: RyanTumilty
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