Housing Affordability and the Political Landscape

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From Dream to Distant Memory: How Ottawa is Rewriting the Future of Canadian Housing

There was a time—not long ago—when owning a home in Canada was seen as a rite of passage. It wasn’t a luxury or political talking point; it was a goal shared across generations, a cornerstone of financial independence and family stability. But that Canadian dream is becoming harder to attain, and for many, it’s already out of reach. Sadly, if the current federal housing policy continues, homeownership may become something our children can only read about in history books.

As a long-time mortgage professional and municipal leader, I’ve seen firsthand how policy decisions made in Ottawa are playing out in communities across Canada. In 2018, the federal government introduced the mortgage stress test—a rule that requires all borrowers, even those with 20% or more down, to qualify for a mortgage at rates significantly higher than what they’ll actually pay (contract rate plus 2%). While intended to protect Canadians from overextending themselves, the reality has been quite different – one only needs to look at what happened to many who found themselves stuck in a variable rate mortgage at a time when rate hikes were often and significant.

Despite qualifying at a higher rate initially, many still felt the price shock.  Why? Because a fictitious rate used at the time of qualifying was not what was used to determine the average Canadian’s budget.  Most, if not all, used their actual mortgage payment to determine their monthly budget and this is just once aspect of the stress-test that the government miscalculated.

Instead of building resilience, the stress test has sidelined responsible buyers—especially first-time homeowners, self-employed individuals, and middle-income families. In markets like the Okanagan, where housing prices are already high, the average buyer has lost upwards of 20% of their purchasing power. That often makes the difference between owning a modest starter home or being locked out of the market entirely.

The unintended consequence? A generation of Canadians is being forced into permanent rental status—not because they can’t afford to own, but because federal policy says they shouldn’t. Meanwhile, demand for rentals is surging, pushing up prices and compounding the affordability crisis. And it is here we have a conundrum – many are experiencing equal or greater monthly housing costs due to increased demand and limited supply in the rental market.

So, for most, paying $3,000 for a mortgage payment where you can build equity is a much better proposition than spending the same amount on a home that isn’t yours.  It is hard to rationalize how we got here and how perplexing it is to tell would-be homeowners that they can’t own because the policies have limited their options.

Fast forward to the current Liberal campaign trail, where we’re seeing a new narrative emerge—one that further shifts control of housing away from individuals and the private sector, and into the hands of the federal government. The Liberal Party has pledged to build 500,000 new “affordable” rental units across the country, with government playing a central role in planning, funding, and overseeing construction.

On the surface, it may sound like a bold solution. But let’s be clear: this is not a market-based approach. It’s a fundamental shift toward centralized planning of what was once a private sector-driven initiative. The same federal government that imposed restrictions on mortgages, overregulated development, and contributed to the affordability crisis now claims it can build its way out—with taxpayer dollars and bureaucratic control.

We should all be asking: at what cost?

Government intervention has its place—but not when it comes at the expense of private enterprise, individual choice, and long-standing pathways to prosperity. By focusing almost exclusively on subsidized rentals, Ottawa is effectively redefining housing policy in Canada: no longer as a way to help citizens build equity, but as a managed service that people should rent, not own.

This isn’t just bad economics—it’s bad for communities. Renters deserve stability and dignity, but they should also have a clear path to ownership. That means rethinking federal policies that are doing more harm than good:

  • Reform or phase out the stress test for well-qualified buyers,
  • Reintroduce longer amortization options for first-time homeowners,
  • Rein in federal overreach and empower provinces, municipalities, and the private sector to lead housing solutions.

The dream of homeownership is not an outdated ideal—it’s a lifeline. It fosters stronger communities, builds intergenerational wealth, and gives Canadians a real stake in the future of their cities and towns.

It’s time to stop managing decline and start restoring the path to ownership.

Because housing should be more than a place to sleep—it should be a place to grow, invest, and call your own.

These are only my thoughts and opinions on a subject matter that I know a little something about.  There is always a place for government involvement but if they truly want to tackle this “crisis” then they need to get out of the way.  They need to build incentives for the private sector as they are far more capable of building faster, better and with a targeted market-focus.

Stay tuned as I bring forward ideas that could be harnessed if governments were serious about the housing market.  These aren’t some radical concepts I will share.  They are bringing forward a new modernized approach based on old concepts to.

Kari Gares

Mortgage Broker/Owner

Navigating the Impact: Government Regulations and Home Ownership

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In the dynamic landscape of Canada’s real estate market, government regulation plays a pivotal role in shaping the experience of home buyers. Nowhere is this more evident than in BC, where the interplay between regulatory measures and market dynamics profoundly influences affordability and accessibility to homeownership.

So, what does this look like?

  1. Affordability Constraints: Government regulations, such as stress tests and tightening of lending criteria, can directly affect home buyers’ purchasing power. These measures are implemented to ensure financial stability and prevent overheating in the housing market (OSFI). However, in high-demand regions like BC, where housing prices are already elevated, these regulations can pose significant challenges for prospective buyers, particularly first-time home buyers and those with modest incomes.
  2. Regional Disparities: The impact of government regulation varies across different provinces and territories, reflecting the diverse economic and housing landscapes. In BC, where housing affordability has been a longstanding concern, regulatory interventions often aim to temper market speculation and rein in price escalation. While these measures are designed with the best intentions, they can inadvertently create barriers for aspiring homeowners, exacerbating the housing crisis in urban centers like Vancouver and Victoria but these impacts aren’t isolated to these areas.  We are feeling the pinch here at home.
  3. Market Stability vs. Accessibility: Striking a balance between market stability and housing accessibility remains a formidable task for policymakers. Stringent regulations may stabilize housing markets and protect against economic downturns, but they can also impede entry for qualified buyers, particularly in regions with soaring housing costs. BC’s unique geography and demographic trends underscore the need for tailored approaches that address both affordability and market stability.
  4. Innovative Solutions: Recognizing the complexities of the housing market, governments at all levels are exploring innovative solutions to enhance affordability while safeguarding financial integrity. Initiatives such as shared equity programs (which have had little uptake), incentivizing rental construction, and targeted tax policies aim to provide pathways to homeownership while mitigating risks associated with excessive borrowing and speculative activity.
  5. The Role of Mortgage Brokers: In navigating the regulatory landscape, mortgage brokers serve as invaluable allies for home buyers, offering expertise and guidance tailored to individual circumstances. By staying abreast of regulatory changes, mortgage brokers help buyers navigate complex mortgage products, optimize financial strategies, and identify opportunities for homeownership despite regulatory headwinds.

In the end, government regulation profoundly influences the mortgage industry and, by extension, the experiences of home buyers across Canada. In BC, where housing affordability is a pressing concern, finding the delicate equilibrium between regulatory oversight and accessibility remains paramount. By fostering collaboration between policymakers, industry stakeholders, and consumers, we can cultivate a housing market that is both resilient and inclusive while ensuring that the dream of homeownership remains attainable for all Canadians.

It is a delicate balance where the scales can tip too easily from one side to another if governments are unwilling to pivot when adjustments need to be made. Of course, the multitude of changes happened because of the over-heated market; but I worry that in our attempt to regulate, and/or de-escalate market conditions we have created the very conditions to which we are trying to circumvent.  By trying to control affordability through regulation we have created the perfect storm that has discouraged home-ownership or made it more challenging for people to enter the market.

Why is this a problem?

By preventing Canadians from either moving up or down within the housing continuum, we have effectively created a backlog in both market ownership and rental accessibility. Now, I am not suggesting that all regulations are bad because they aren’t.  Regulations are designed to maintain the health of the financial banking sector (the 2008 Global Crisis is why regulations are important).  Without it, we may see a repeat of what happened globally. But, the housing sector has a significant impact on our economy.  When this sector falters, we all feel it.  We must strike a delicate balance to ensure housing is not only affordable but accessible while safeguarding the financial sector as a whole.

Kari Gares – Mortgage Broker

Verico Mortgage House – Kari Gares

Making Sense of the Unsensical: New Government Rules Impacting the Mortgage Industry

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KARI-GARES-OKANAGAN-POWER-BROKER

October 17 of 2017, our Canadian Government, under the hand of OSFI, made an announcement that had many stakeholders in the Mortgage Industry shaking their heads. We are now 2 weeks into the new B-20 guidelines that will, inevitably, shape the Mortgage market and lending climate for many Canadians looking to buy, refinance or even invest. It’s easy to buy into the rhetoric that these changes are needed to help save the “average” homeowner from themselves. These government policy adjustments were, in their mind, to help curb high household indebtedness and improve affordability. And honestly, it is very easy for most Canadians to agree to this statement. We simply need to look at major city centres like Vancouver and Toronto to see how unaffordable the housing market is and how many are stretched thin because of it. Unfortunately, these changes do little to protect the average home owner.

It’s easy to buy into the rhetoric that the Government is looking out for the little guy. That they are protecting our largest and most costly investment by ensuring each borrower can withstand an interest rate shock – in the event rates go up. And for those mortgage applicants with more than 20% equity in their home, will soon find their borrowing power substantially reduced. And for what reason?

More shocking, is that many of these borrowers will see higher servicing costs than those with only 5% down! Let me state this fact one more time…. if you have 20% down, not only do you have to qualify at your mortgage commitment’s contract rate plus 2%, your interest rate on that loan will be up to .50% higher on average. So, by using this example, an applicant who is purchasing a home for personal use, who has 20% down, long tenure with their employment, good savings (this is assuming we are dealing with a more mature client who has been in the market for a while), will pay more than someone with a 5% down payment. A standard 5 year fixed rate for a low ratio mortgage (non-CMHC insured) is 3.59% whereas a high ratio mortgage (CMHC insured) is 3.19%. That’s a .40% difference. That’s an additional cost of $6,000 over the term.

And it doesn’t stop here! When qualifying, under this same scenario, the low ratio mortgage holder will need to qualify for their mortgage at a rate of 3.59% + 2% or 5.59%, whereas, the same high ratio applicant only needs to qualify at the Canadian benchmark rate which is currently 5.19% (just up from the recent 4.99%). If we are dealing with affordability and if we are attempting to protect borrowers from rising rates, why would an applicant with more equity need to qualify at a higher rate? Even more perplexing, these rule changes do not account for the principle reduction that each borrower will pay over the 5 year term or the market gain that they may realize over the same period. Given this same rate scenario, and an amortization schedule of 25 years, this borrow would realize a reduction in principle of $41,500 – and this is not assuming any accelerated payments which the majority of consumers prefer (bi-weekly payments would equate to a reduction of $49,100). So that same $300,000 mortgage, upon maturity, will carry a new balance of $258,500 or $250,900 respectively. Giving perspective to costs, the original payment amount was $1,508 per month will now be, upon renewal, $1,590 assuming a rate increase from 3.59% to 4.25% (which is closer to pre-2007 rates) and a new amortization schedule of 20 years. That is a modest increase at best and one that shouldn’t have devastating effects upon renewal.

And here’s why:

Canada’s stringent banking policies ensure that all borrowers, at the time of application, do not exceed 44% (if your credit score is above the 680 beacon requirement) of their total income for all debt repayment which includes: mortgage payments, heat, property taxes, and any other outstanding debt payments (it is important to note that any revolving debt facilities are typically calculated at 3% of the outstanding balance and not the minimum). These strict rules ensure that potential borrowers are not maxing out their disposable income to pay for their shelter costs. These rules have prevented a US Housing crash as seen in 2008 – less than .28% mortgage defaults were seen at this time. It also doesn’t account for increase in earnings which should help offset this increase.

What these changes will do is create an environment that could possibly bring to light the very scenario they are wishing to avoid. We are now 2 weeks in under these new rules and these changes are having a profound impact on many. In my opinion, we are stifling one’s ability to achieve home ownership so that they can build wealth, in the form of equity, for themselves. We are forcing people to sell as they can no longer qualify for the home that they have resided in for years (divorce/separation situations take note). And we are forcing people back into an already precarious rental market where rents, at times, far exceed that of a mortgage payment. We are placing further burden on an already burdened market. We have more demand than inventory and that is creating a supply issue. And this goes to the heart of the problem – housing prices are high because demand outweighs supply. If we prevent people from moving beyond the rental market, then we are reducing supply there to. This in turn, will place pressure on rental values. We have already seen it. People paying more to rent than what it would cost to buy. The housing market is cyclical and tends to correct itself when conditions change. Bad Government policy will only make conditions worse.

This is why we cannot make sense of the unsensical – it simply doesn’t make sense. All we can do now is find solutions to help all borrowers realize the potential in home ownership. Building wealth is not isolated to the wealthy. You just need a good team of professionals that can help provide guidance and options when solutions seem bleak.