Liberals have options to help more millennials buy homes, experts say

A real estate sign is pictured in Vancouver, B.C., Tuesday, June, 12, 2018. THE CANADIAN PRESS Jonathan Hayward

OTTAWA -- The federal Liberals have several options as they look for ways to help more millennials buy homes in an era of pricey real estate and rising borrowing costs, housing experts say.

Finance Minister Bill Morneau said earlier this week Ottawa is exploring measures to make home ownership affordable for more millennials, a generation made up of people who are now in their mid-20s to late-30s.

Morneau didn't elaborate on what options he's considering, but Canadians could learn more in the coming weeks when he releases an election-year budget that will also lay out Liberal platform commitments.

Major political parties have already started positioning themselves on the complex area of housing affordability. It will likely emerge as an important campaign issue ahead of October's federal election, and the challenges of millennials and first-time buyers could attract a lot of attention.

"There's no silver bullet to making housing more affordable for younger generations," Paul Kershaw, an associate professor in the University of British Columbia's school of population and public health, wrote in an email Wednesday.

"What we need to do is modernize outdated policies that make the regular housing market inefficient."

Kershaw, who is also the founder of the Generation Squeeze group dedicated to informing policy decisions about the socioeconomic challenges of younger Canadians, said boosting a permanently affordable housing supply is one way to help.

He also recommended putting limits on zoning rules that encourage lower-density neighbourhoods. Kershaw's been calling on Ottawa to provide incentives for cities to add supply in lands that are currently zoned for low density.

In recent years, Ottawa has taken steps to cool the hottest markets -- such as Toronto and Vancouver -- with the cross-country application of stress tests that have limited some people's ability to qualify for mortgages and have reduced the size of new loans.

The stricter rules have played an important role in preventing Canadians from piling on more mortgage debt, but experts say they've also put home ownership out of reach for many new buyers.

"There's a lot of folks that just don't qualify to purchase anymore at the bottom end of that ladder," said Paul Taylor, president and CEO of Mortgage Professionals Canada.

Taylor said the stress tests have succeeded in taking some of the froth out of the market and he believes the time has come for Ottawa to loosen them. In recent meetings with federal officials, he said he has recommended the reintroduction of insurance on 30-year amortization mortgages as a targeted way to help people at the lower end.

The coming weeks would be a good time for some changes with the busy spring season is approaching, he said.

"If we have another cool spring market, that's going to have serious knock-on effects to the economy," said Taylor, who was encouraged by Morneau's comments.

Tom Storey, an agent with Royal LePage Signature Realty in Toronto, said young buyers can usually afford to keep up with monthly mortgage payments, but the effects of the stress tests have made it much more difficult for them to enter the market.

Storey said changes designed for first-time buyers -- such as more lenient stress tests for them and bigger rebates on land transfer taxes -- could improve affordability.

"Millennials and the first-time buyers are eager to get into the market," he said.

Pollster David Coletto said a housing policy aimed at millennials could be a vote winner among this increasingly critical demographic that he estimates will make up about a third of eligible voters in this year's election. It's now a bigger segment than the baby boomer generation, he said.

Coletto, CEO of Abacus Data, said for the last two or three years his surveys have suggested that, along with jobs, affordable home ownership has been among the top two issues for millennials.

"There's a passion and an intensity about this issue with younger people," he said.

He added there's a perception among millennials that Ottawa has actually made it harder for them to buy a home, even if the direct decisions to hike interest rates were made by the Bank of Canada and not the government.

The Liberals, Coletto said, have to find a way to mobilize and engage young voters like the party did in 2015. He believes there's a lack of enthusiasm among younger voters right now, which represents a real risk for the Liberals.

"I look at the data and I still see some vulnerabilities there," he said.