As the front runners in the provincial election campaign exchanged housing proposals, prominent economists offered different interpretations of what each might mean for British Columbians.
The most recent proposal came from B.C. NDP Leader David Eby on Wednesday (Sept. 25) when he promised to extend province-wide a housing model first announced last week in Vancouver.
The model would see the province finance 40 per cent of up 25,000 units for first-time home buyers subject to income-testing over five years at a total cost of $6.45 billion. It assumes free or low-cost land from various partners including non-profits, local governments, First Nations and private developers. Eligible buyers must secure financing for the remaining 60 per cent.
It comes after the Conservative Party of B.C. under Leader John Rustad promised to give renters and mortgage-holders a tax deduction of up to $3,000 by 2029, later adding that households earning more than $250,000 could be exempt. That proposal would cost about $3.5 billion per year.
Ken Peacock, chief economist at the Business Council of British Columbia, said the Conservatives' proposal is easy to administer and more broadly accessible as it would capture rent or mortgage payments.
He said the Conservatives' proposal — unlike the New Democratic proposal — is not limited to new housing stock, but applies to the entire housing market. Nor would it require an additional bureaucracy to determine participants, he said, adding that it could be easily adjusted up or down.
"One is open to everybody with reasonable limits on income, the other (NDP) approach is people line and apply," Peacock said. "It really feels a lot like a little bit like a lottery."
However, another economist had a different take. Alex Hemingway, senior economist with the Canadian Centre for Policy Alternatives, said Conservative plans to repeal Bill 44 — which allows anywhere between three and six units on lots currently zoned for single family homes — and legislation prohibiting short-term rentals, are steps in the wrong direction.
"In the context of a housing shortage, it will pump up demand and inflate rents and prices," Hemingway said. "This is particularly concerning since they are also planning to re-introduce supply restrictions by rolling back provincial badly-needed zoning reforms, which themselves don't go far enough, and nixing AirBnB rules."
He called the Conservative proposal is a "textbook example of a band-aid solution."
Hemingway also questioned the fiscal impact of the Conservatives' proposal in calling it "very expensive" and predicting that it "would necessitate cuts in other public services that have not been identified."
Rustad promised to pay for the plan through reduced spending and a growing economy, and said Monday that NDP mismanagement means his party would have to roll it out over time.
Peacock acknowledged the Conservatives' proposal comes with a price tag, but no additional borrowing, and a future Conservative government could raise or lower the deduction depending on the fiscal situation.
Hemingway, meanwhile, acknowledged a role for cash assistance in housing policy.
"It needs to be well-targeted (at) low and modest incomes to ensure it's helping those who need it most and to minimize those inflationary effects on rents and prices," Hemingway said. "But in the case of this proposed tax credit, people on lower income will tend to benefit less (or not at all), as they pay less provincial income tax (or none at all) to which the tax credit can be applied."
He said the NDP plan "looks more reasonable" because it is tied to new housing construction, which would avoid what he called an "inflationary effect" on the broader housing market.
"In other words, since the financing goes towards new homes, it won't be used to bid up the prices of the scarce existing housing stock, as is the case with the (Conservatives') plan and as with the recent federal Liberal changes to mortgage rules."
Hemingway also likes that the NDP proposal is cost-neutral. While the government would have to borrow the money on capital markets, it would be paid back with interest and a portion of any price appreciation, he said.
"This means it should have little effect on the provincial budget," he said.
He added that the province would also acquire an asset, namely the mortgage plus a share of the appreciation backed by the property itself. According to government, about one-third of people who buy condo units resell them within ten years. As people resell their units and repay the government financing, this will create funding that can then be used to support more families to get into affordable homes.
"I would say this policy is not a game-changer, but it could serve a constructive role in addressing the housing crisis, both in terms of facilitating new home construction and providing financing assistance to middle-income buyers," he said.
But Hemingway tempered his praise with the call for additional measures.
"(It) certainly needs to be complemented by more crucial policies like significantly expanding non-market rental housing investment, including units targeted to those on low incomes, and addressing highly restrictive municipal zoning policies that suppress housing creation."
B.C. Greens Leader Sonia Furstenau said Wednesday in Victoria she would need time to study the proposal.
"What I will say is we need housing policy right now that protects the most vulnerable and the most marginalized," she said. "We have a homelessness crisis in B.C. Let's start there."
