An increase in housing supply is unlikely to result from the federal government’s changes to the foreign buyer ban, says the CEO of the Canadian Home Builders' Association (CHBA).
Instead, it’s a shift back to the state of the B.C. housing market prior to Jan. 1, the day the ban came into effect, according to the CHBA’s Kevin Lee.
“We're going to need other incentives to help ensure that we get more housing supply online. But this should at least prevent a decrease in housing supply because of a regulation that was unintentionally crafted to do that,” he said.
While there may not be an increase in supply, improvements will be seen in less uncertainty and not knowing whether a developer is “going to be caught up by this or not,” said Jason Turcotte, president of Darwin Construction Ltd.
“It was causing some challenges for new developments to move forward,” he said. “Because it was such a short period of time, and the legislation came out at the beginning of the year, it didn't have much of an overall impact. But had it not been changed, it certainly would have put a constraint on development one, and two and three years from now.”
The Prohibition on the Purchase of Residential Property by Non-Canadians Act, or the foreign buyer ban, came into effect at the beginning of the year with the intent of banning foreign property purchases for two years to promote more housing supply, according to the Canadian Housing and Mortgage Corp. (CMHC).
However, the regulations attached to the ban worked against this by restricting development, Lee said.
The regulations originally prohibited Canadian companies with more than three per cent foreign ownership from buying vacant land for residential development and from purchasing properties with fewer than four units on them.
The regulations have been changed to allow for a 10 per cent threshold of foreign control and for exceptions for work permit holders, according to the CMHC. The ban will also no longer apply to vacant lands and will allow foreign purchasing of residential properties for the purpose of development.
“These are the types of changes that we needed to see,” said Lee. “What the regulations had unintentionally done was really impact the development industry, the construction industry and prevented many industry players from just continuing to do normal business.”
Joo Kim Tiah, CEO of TA Global and the Holborn Group, said the new regulations are more in line with the federal government's position on housing. He added the new regulations won’t make a difference when it comes to building more supply due to existing market conditions.
“The high interest rate environment, uncertainty of construction cost, labour shortage, inflation, risk of a recession, long approval process are some [existing market conditions], to name a few,” he said in a statement to Glacier Media.
According to Lee, programs like the Housing Accelerator Fund will act as a better avenue to increase housing supply. The program launched on March 17 after being introduced in last year’s federal budget.
The $4-billion initiative is meant to fast-track the building of 100,000 new and affordable homes across Canada, according to the federal government.
Local governments are invited to develop action plans and submit them in June to be considered for funding. The goal is to cut down on red tape that may create barriers to building housing faster.