On Monday, Oct. 3, federal Finance Minister Bill Morneau proposed a series of changes to federal policies and legislation affecting mortgage loan insurance, mortgage lending rules and tax treatment of capital gains from principal residences for foreign buyers.
Both the Canadian and Manitoba Home Builders Associations have serious concerns for potential homebuyers, particularly first-time buyers. Of particular concern is the "stress test" whereby all insured homebuyers must qualify for a mortgage at the Bank of Canada’s conventional five-year fixed posted rate, which is much higher than actual rates.
This will reduce the amounts available to buyers, thereby locking out many first-time buyers and possibly buyers who have already qualified but not yet secured their mortgage.
Conventional mortgages will also be affected by new portfolio insurance rules. According to a CHBA-commissioned study, one-third to one-quarter of first-time buyers could be removed from the market.
It appears as though the legislation was introduced as a response to rapidly rising prices in Toronto and Vancouver. However, federal legislation is federal legislation, so the entire country is impacted. The intent may have been to protect homebuyers from possible increases to interest rates in the future, but there is still no sign of that happening.
The aforementioned stress test requires buyers who may qualify for a five-year rate of 2.59 per cent to qualify at 4.64 per cent. It also sets a ceiling of 39 per cent for household carrying costs. Since only one in every 357 Canadian homeowners (and even fewer in Manitoba) defaults on a mortgage, are we attempting to solve a problem that doesn’t exist?
The unintended result is that renters who want to become buyers are going to be kept out of the market longer. An example floated was that someone who could afford $1,500 in monthly rent may not be able to afford or qualify for a monthly mortgage payment of $1,100 or $1,200. The same principle will apply to those people hoping to move up in the housing market. Their purchasing power gets downgraded under this new system.
One unfortunate consequence of this federal action may be stagnancy of the housing market in slow-growth municipalities such as Winnipeg. If renters cannot afford to be first-time buyers under this new scenario, apartments won’t open up for those wanting to move here. If current owners wishing to move up in price range find it more difficult to do so, movement in the housing market slows down considerably.
Finally, demand then slows for the new-home market, thereby negatively impacting growth and mobility in the city. This hits us where it hurts — job losses.
Creating a national policy for a two-city problem sounds like a strategy that needs to be revisited.
Mike Moore is president of the Manitoba Home Builders’ Association.
When Genstar Developments conceived Devonshire Village, one of the goals was to achieve a diverse housing mix. Now, with the addition of The Gateway — a townhome complex conceived by Edmonton-based Daytona Homes— the community will truly have something to offer everyone, from single-family homes to condominiums, and now, affordable two-storey townhomes.
Daytona Homes’ vice-president of land development, Alexander "Sandy" Ladd said the reason for the 23-year-old company’s entry into the Winnipeg market is simple: "We’re a builder whose main focus is on first-time buyers, and buyers who are looking for a move-up home," he said. "We looked at the Winnipeg market, and thought there was a need for that type of product there. I think we can provide what the market is looking for with our proven product, and what we’ve learned in building it in other communities in western Canada."
What Daytona Homes has done in those communities is simple, said Ladd. "Our goal in Winnipeg is the same — to build affordable homes people can be proud of. People will be able to own the homes outright, and there won’t be any condo fees to pay."
The townhomes — 55 two and three bedroom attached homes spread out over 11 buildings — will range in size from 1,220 square feet to 1,280 sq. ft. Prices will start at $269,900 and top out at about $289,900.
"They’re going to be good-looking, affordable homes," said Ladd. "Each one will come with its own backyard with patio as well as a cement pad that will enable buyers to build a garage on it if they desire. They are going to be homes in the truest sense of the word."
As for interior finishes, Ladd said the homes will be nicely appointed. "Standard finishes will include carpeting, linoleum, laminate countertops and thermofoil cabinets, with some nice extra touches such as backsplashes and lighting upgrades. There will be three different interior packages to choose from, and a limited number of upgrades will be available."
Russ Wyatt, who has represented Transcona on Winnipeg’s city council since 2002, said he welcomes Daytona Homes’ entry into the Winnipeg marketplace.
"I think it’s good to have competition, and in particular, it’s good for consumers," he said. "Daytona Homes is going to provide an affordable housing option for first-time buyers and families looking to upgrade to a second home." Not only that, but The Gateway is making good use of vacant land within city limits, he added.
"This project is using infill land, which is a real plus. It’s also in a great location, 20 minutes from downtown and about five minutes from conveniences on Regent Avenue. It’s also a welcome project in that it will be crucial in growing the tax base. Projects like this, which allow for transition and renewal, not only provide affordable new housing, but allows (the city) to add new owners to tax rolls rather than increasing taxes."
Construction on The Gateway has already started at 568 Transcona Blvd., between Peguis Street and Chelston Gate. Daytona Homes’ general manager, Barry Hedgecock, said if everything goes smoothly, homes should be ready for possession before the end of 2016.
"We’re hoping for the end of October or early November, but certainly, buyers should be able to take possession of their homes before the end of the year," he said.
For more information on the project, visit daytonahomes.ca.