As house prices spin out of control, Canada’s federal housing minister has said his government doesn’t want to do anything that will hurt “mom and pop” real estate investors.
“Small landlords are adding to the rental stock,” said Ahmed Hussen, Minister for Housing, Diversity and Inclusion, in a recent interview. “They provide rental fleet to Canadian families and individuals. And so we don’t want to affect them negatively because they actually provide a rental service to a lot of people.
Individual investors are responsible for 20% of all home purchases in the country, according to recent data from the Bank of Canada, and many of them rent out their properties for income.
But with the price of typical homes in the country 41% more expensive than in January 2020, individual investors are intensifying competition for properties and contributing to higher home prices.
Mr. Hussen said “many of these Canadians” are turning around and “renting out their newly acquired properties and providing more rental units that allow Canadian families and individuals to rent.”
“There’s nothing wrong with that,” he said.
As part of the federal government’s attempts to slow rising home prices, it is reviewing down payment requirements for investors. The Liberal Party unveiled this plan during last year’s election campaign.
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When asked if the down payment requirement for rental properties should be more than 20% of the purchase price, Mr. Hussen replied that he could not answer that question and stated that he did not want to “prejudge” the budget process.
The federal budget is expected to provide details on how the Liberal Party’s 2021 campaign platform will be transformed into government policy. It is not known when the budget will be unveiled.
The banking regulator, the Office of the Superintendent of Financial Institutions, does not have specific rules for investment properties, but an OSFI spokeswoman said the regulator expects banks “precisely measure and underwrite the risks they can take”.
The federal mortgage insurer, Canada and Mortgage Housing Corp., only offers mortgage insurance on investment properties if borrowers put down at least 20% on rental properties with two to four units. and cost less than $1 million. Two of Canada’s big banks, Royal Bank of Canada and Bank of Montreal, have said they require investors to put down 20% on rental properties.
The federal government and the housing minister have been looking for ways to slow the rapid rise in house prices and help young Canadians buy homes.
Mr. Hussen has been tasked by Prime Minister Justin Trudeau with working on a temporary ban on purchases by foreign buyers, as well as an anti-rollover tax on homebuyers who sell a property within 12 months of buying it.
“This will reduce speculative demand in the market and help curb excessive price growth,” the minister’s press secretary, Arevig Afarian, said in an emailed statement.
Over the past three decades, individual investors have provided the majority of new rental housing in Canada. They helped fill a lack of rental housing when the supply of purpose-built rental housing began to decline in the 1990s.
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