As it seeks re-election on Oct. 19, the single significant housing strategy the BC NDP has costed in its platform is one that subsidizes home purchases for first-time homebuyers.
The $6.45-billion-plus-interest “Opening Doors to Homeownership” financing plan is to provide loans for 40 per cent of a home’s purchase price to 25,000 first-time homebuyers.
At least two independent affordable housing advocates are critical of the plan, raising the question: is NDP Leader David Eby “juicing” the real estate market during an affordable housing crisis?
“This is just another scheme to keep the prices where they are,” said Vancouver resident Rohana Rezel.
Raymond Wong, a member of Housing Action for Local Taxpayers, shared a similar view of Rezel.
“We don't need more money in the system. This is one of the reasons why we have a housing crisis, because the Bank of Canada stimulates the market and our federal government stimulates the market,” said Wong.
And now, said Wong, Eby is “juicing the market.”
The NDP plan, announced Sep. 25, was also panned on social media website X by Conservative Party of B.C. Leader John Rustad, a former member of Christy Clark’s cabinet, saying Eby is expanding options to share home ownership with “big daddy government.”
“And for me,” said Rezel, “the scary part with this plan is that the government now has an incentive to keep the prices up, because when the home price goes up, they take a cut,” added Rezel.
How does the 'big daddy' plan work?
By “taking a cut,” Rezel was referencing the financing terms of the plan.
Under the plan — which is modelled off of a previously announced provincial government plan for leasehold purchases in Vancouver — when a buyer takes ownership of their 40 per cent subsidized home, they are under no obligation to repay the government’s equity share until 25 years from the purchase, or when they sell the home, whichever comes first. Then, 40 per cent of any home equity losses or gains are realized by the provincial government.
The plan will subsidize 5,000 purchases of new residential units each year for five years, at a cost of $1.29 billion per year.
On average, government will spend $258,000 on each purchase, meaning the average price per unit envisioned is $645,000. There’s no mention of how the plan will be dispersed geographically.
As the NDP states, “this would mean a two-bedroom condo that would normally cost $1 million,” presumably in the Lower Mainland, “would be accessible at a price of just $600,000.”
As such, the buyer only needs a down payment of five per cent of 60 per cent of the home’s total price.
The NDP says it will partner with “non-profits, local governments, First Nations, and market partners to identify land and projects for development.”
Andy Yan, housing analyst and urban planner at Simon Fraser University, said the plan could assist in keeping some of these development firms, including First Nations, afloat during this period of inflated interest rates and construction costs.
Yan said the plan ultimately hinges on inflation of land values: “I’m punting my risk so that 25 years from now it will be worth more. Well, I guess. Do you believe in Vancouver real estate? Say Hallelujah.”
Conditions include interest cost of loan set at 1.5 per cent
The plan also hinges on several conditions. To start, the government will only finance households with incomes less than about $192,000 (for two- and three- bedroom units), or less than about $132,000 for studio and one-bedroom units.
Buyers cannot hold an interest in a property anywhere in the world, must be a citizen or permanent resident of Canada, having lived in B.C. for two years, and net household assets cannot exceed $250,000 (assets include cash but not jewelry or vehicles).
As an aside, Yan said given what has allegedly occurred at at least one so-called “attainable” home ownership housing project in Victoria — where poorly screened buyers allegedly lied about assets and existing home ownership — verification processes and auditing of buyers will be important.
“We've known that there are problems with asset verification,” said Yan.
Conditions also prohibit pre-sale contract flipping and discourage short-term flips: if a buyer sells their unit within three years, the government will tax capital gains (of the buyers’ 60 per cent share) at a rate of 100 per cent in the first year to 33 per cent in the third year).
If a buyer sells at the 25-year expiration the buyer must repay the 40 per cent loan. This loan, too, likely acts as a further subsidy because the interest rate charged is capped at 1.5 per cent, compounded annually, well below any long-term Bank of Canada projection.
Interest paid on $6.45 billion over a 25-year term, at 1.5 per cent, is $2.9 billion. But if one assumes a three per cent rate for government, the interest will cost about $7 billion — a $4.1-billion difference.
While interest costs were never mentioned by the government or the party, Rezel said this is yet another reason an NDP government is banking on home values to rise, since equity gains could theoretically cover interest costs over that period.
Eby was once critical of home ownership subsidies
The plan takes more than a page out of former BC Liberal premier Christy Clark’s much more modest $700-million “B.C. Home Owner Mortgage and Equity Partnership,” which offered five per cent down payments to such first-time buyers.
At the time, in December 2016, prior to the spring 2017 election, Eby called Clark’s plan “bizarre” and “out of touch” for saddling new homeowners with more debt.
Then, when it was clear a decade of low interest rates and foreign money, had caused demand in Vancouver’s housing market to soar, Eby, as housing critic, was a chief proponent of curbing demand and saw Clark’s plan as one that would saddle more debt onto families.
“I can’t believe that the government’s response to people not being able to get into the housing market is to facilitate and encourage them to take on more debt,” Eby told the Vancouver Courier on Dec.15, 2016.
“The federal government is trying to rein this in with changes they’ve made, and the B.C. government is saying borrow more money. It’s a huge risk to take,” Eby told the Vancouver Sun.
Tsur Somerville, UBC’s director of the Centre for Urban Economics, told the Sun, that the federal government was trying to cool the market by introducing mortgage stress tests “and now you have Christy Clark trying to give people extra gas (for the fire).”
Under Eby’s NDP plan, said Rezel, “you're buying something that you can't afford, because the sole reason you're buying it is because the government is basically subsidizing you. It's basically the government is playing the ‘bank of Mom and Dad.’”
Rezel said the plan may benefit those who “win the lottery” to buy a subsidized home, “but this is going to end up with more losers than winners, in my opinion.”
Rezel ultimately concluded he’s unsurprised by the policy shift, considering the disproportionate number of MLAs who are homeowners and landlords.
“The vast majority of the MLAs are homeowners and a significant fraction of them are landlords. So I really think they don’t understand what life is like for the average renter,” said Rezel, acknowledging Eby had been a renter until 2022, when his family purchased a $2.2-million townhouse.
NDP not denying stimulative effect of plan
Glacier Media asked North Delta MLA Ravi Kahlon, who has served as B.C.’s housing minister, whether the plan would have an effect of raising home prices.
Kahlon did not deny it could, but, rather, said the plan comes in conjunction with several supply and demand-side measures the government has taken.
Asked to further clarify his position Kahlon said, via email, “the program is not being delivered in a vacuum and we specifically decided to pair this financing option with the construction of new housing supply.”
Back in 2016, Clark also dismissed the notion her plan would have a stimulating effect because the plan was limited to new homes. But home prices only rose further, despite Clark, as well, claiming to have introduced demand-side measures, such as the foreign buyers’ tax.
Kahlon also noted that his government, if re-elected, will target units for this plan that can be built on public land or through non-profit housing providers, which could bring prices below market (which could mean an even greater public subsidy for the home owner, if the public land is used without a leasehold).
It remains unclear just how many billions of government dollars will stream into the private housing market via partnerships with private developers, including First Nations firms.
Alex Hemingway, an economist and policy analyst of the left-leaning government-funded think tank Canadian Centre for Policy Alternatives (CCPA), is of the view that more aligns with Clark, than Rezel.
Hemingway said because the plan targets new homes and is limited to 25,000 units it won’t provide for such a broad stimulative effect on the market.
Is B.C. government stuck between a rock and a hard place on housing?
Rezel acknowledges the NDP, since 2017, has taken measures to address demand, such as the speculation and vacancy tax, short-term rental restrictions, an added property tax on homes valued over $3 million, plus increasing the foreign buyers’ tax.
“But I'm not convinced that these measures were as bulletproof as you'd think,” said Rezel.
Wong is also skeptical of the measures and said Eby has taken his foot off the gas, so to speak, on money laundering in real estate.
"I don't know if they have any RCMP officers on the money laundering file anymore. But I sort of feel like David Eby has sort of sided with (Prime Minister) Justin Trudeau on this and it's unfortunate," said Wong.
The NDP has also touted up-zoning regulations imposed by Victoria that outlaw any municipal bylaw that prohibits modest densification of single-family home lots into two, or even six units per lot — a concept presently endorsed by federal Conservative Party of Canada Leader Pierre Poilievre but opposed by Rustad.
In Kahlon’s statement, he blamed the previous BC Liberal government (2001-2017) for inaction on building affordable housing; he also blamed high interest rates for construction delays.
Eby has also maintained publicly that meeting construction targets to meet population increases spurred by heightened immigration rates is challenging.
The NDP platform cites record levels of immigration three times in its platform, and promises to “lobby Ottawa to reallocate immigration policy and funding to the provincial government,” similar to Quebec’s scheme.
“The provincial government has no control over immigration, right? So that is a big factor and in a way that makes it harder for the provincial governments to act. So maybe that's why the BC NDP has chosen the course of action they have chosen. I'm not very sure, though,” Rezel speculated.
But, he said, “you have to align immigration with your capacity to build housing.”
“You can crank up immigration overnight, but it takes many years to get a house built.”
Is B.C. building enough non-market/social housing?
While the NDP expresses concern over population demands, Hemingway says the provincial government can do more in the non-market housing sector, such as building more co-ops and affordable housing units via non-profit groups.
Kahlon said the NDP is committed to co-ops and building affordable housing on public land but the party’s platform has no costing for it and he was unable to come up with how many co-ops have been built in the past seven years — although this number is understood to be in the hundreds.
Hemingway noted much of the NDP provincial government’s commitments to affordable housing had come prior to this election, and while better than other provinces, it has come up short.
As such, the CCPA is calling for a much more rapid buildout of social housing.
The CCPA noted some of the NDP’s pitfalls in its September 2024 report “Building Equity.”
“The Community Housing Fund (CHF) is the part of the 2018 Building BC program that most resembles historical social or non-market housing that is affordable for low- to moderate-income households. In 2018, the target for the CHF was 14,350 units and in 2023 this target was increased to 20,350 units. However, only 1,475 units had been completed as of the end of 2022, with 4,557 units in development and another 2,911 ‘initiated.’”
The NDP also has a $500-million Rental Protection Fund to buy roughly 2,000 private rental units at risk of re-development and convert them into non-profit-run housing.
