Prime Minister Mark Carney speaks to reporters in Ireland on June 15. The federal and British Columbia governments are developing a program to purchase more than 2,200 condos in B.C. to turn into affordable housing.Christopher Katsarov/The Canadian Press
It is patently unfair that the Carney government has announced plans to bail out condo developers in British Columbia, without even a mention of the struggling venture capitalists in Ontario, the hedge fund managers in Quebec, and the corporate CEOs in Alberta.
Do they not have mouths to feed on their private yachts? Are they not also feeling pressure at the pumps (it’s not like you can put regular unleaded in a McLaren)? And what of the telco giants, who are struggling with sluggish growth and investment opportunities? Where is their billion dollars?
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Ottawa to help finance program to buy unsold condo units in B.C. for affordable housing
I should clarify: the government hasn’t explicitly said it will spend a billion dollars to bail out condo developers by purchasing some 2,200 units that are currently sitting completed and unoccupied in B.C. In fact, neither the federal nor provincial government has said exactly how much it will spend on this joint venture. But reasonable estimates put the cost at somewhere between $1-billion to $1.4-billion, plus whatever costs are incurred to turn these unsold units into affordable housing. That solves the problem for condo developers who, according to Prime Minister Mark Carney, “don’t want to sell at a loss, and can’t afford to hold those empty units indefinitely.”
Finally a government is thinking of the poor, downtrodden condo developers who have made out like bandits for decades, and are only now experiencing the consequences of assuming the boom would last forever and creating investor units instead of homes. Sales of condos in the Greater Vancouver Area are now at their lowest level (outside of the pandemic) since 2018, and are forecasted to fall 15 per cent from their peak in 2023. Meanwhile, thousands of units are sitting unsold, leaving developers in the quagmire Mr. Carney described above. And what was this government supposed to do, really? Let them lose considerable amounts of money in something called the “free market?” Think of their children! (And how much it costs to send them to prestigious schools abroad!)
The government is trying to sell this plan as a win-win: a lifeboat for developers, and a way to open up affordable housing units almost instantly – way faster than it would take to build affordable-by-design housing from the ground up. But allowing an actual correction – that is, getting out of the way, and waiting for prices to bottom-out, even if that means some projects end up in receivership – would more broadly push prices down, levelling the market for everyone. It probably still wouldn’t render these units “affordable” at the level of government-subsidized affordable housing, but it would potentially make them accessible to a middle class that otherwise might not have been able to purchase these types of properties. That would have a much broader net positive effect than what the government is doing, which is artificially propping up the market in a manner that affects everyone, so that a couple thousand people can have access to affordable housing.
Mr. Carney shakes hands with construction workers following a housing announcement at a construction site in Vancouver, on June 18.Chad Hipolito/The Canadian Press
In a recent press conference alongside B.C. Premier David Eby, Mr. Carney said that the problem with empty homes is that they “don’t just sit idle. They also disincentivize new construction, unsettle lenders and investors, [and] create a housing market that in effect feels frozen.” But a government bailout that takes 2,200 completed and unsold units off the market, while another 2,176 unsold units still remain in the Vancouver area, according to data from the Canada Mortgage and Housing Corp. (CMHC), won’t incentivize new construction. In fact, it might disincentivize new construction further, because it will tell developers that the only buyer for their project is the government. It also creates a morass where the government gets to pick and choose which developers it rescues from their own bad bets, which will surely spur others to lobby for their own bailouts, too. After all, if wealthy developers can get bailouts, why shouldn’t hedge fund managers and tech CEOs, too?
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Granted, it would not be great for many in the short- to medium-term if the condo market crashed the way it did in the 1990s. But the larger economic backdrop was different then, and the rules around lending were much less stringent, meaning that the impact of a downturn now is expected to be much less severe. In either case, Mr. Carney’s myopic plan to have taxpayers purchase condos that actual buyers don’t want (at current prices) so that a couple of thousand people have access to affordable housing is the perfect example of the government getting in the way, at great expense to everyone.
But I know, I know: think of the poor, marginalized condo developers, who are at risk of taking [pause for effect] a loss. If this continues, they might have to switch from charter flights to the occasionally first-class ticket. As a country, we simply cannot let that happen.
