OTTAWA \u2014 Criticism is mounting for a proposed federal-provincial program that would acquire unsold condo units in British Columbia and convert them into affordable housing.<\/p>\n
\u201cIt\u2019s moral hazard, it\u2019s socializing losses while the profits flow to developers, so developers can only win, the government will come and bail them out, which is crazy,\u201d said Ron Butler, principal broker at Butler Mortgage Inc. and host of the Angry Mortgage Podcast.<\/p>\n
Last week, Prime Minister Mark Carney along with B.C. Premier David Eby announced a suite of measures valued at $3.2 billion to help the province\u2019s housing sector, including lowering development charges and supporting infrastructure projects.<\/p>\n
One of the measures also included what\u2019s called the \u201cCanada-British Columbia Partnership on Condo Conversion\u201d which would see Build Canada Homes and BC Housing partner up to \u201cconvert\u201d 2,200 unsold condo units into affordable housing.<\/p>\n
Carney said developers \u201ccan\u2019t sell at a loss\u201d and weaker investment demand has made them \u201cstuck.\u201d<\/p>\n
The announcement lacked any detail on whether these condos would be acquired at market price or discounted rate and what the total cost of the measure would be. There was also no clarity on what \u201cinnovative financing tools\u201d would be used in the endeavour.<\/p>\n
National Post reached out to the Department of Housing, Infrastructure and Communities Canada and, in a statement, the department said more details about the program will be shared when they are finalized.<\/p>\n
Mike Moffat, an economist and founding director of the Missing Middle Initiative at the University of Ottawa, said the lack of detail makes it hard to evaluate the merits of the initiative.<\/p>\n
\u201cI do think it makes sense that if governments can acquire good units at a steep discount and turn them into social housing, I do think there can be benefits to that,\u201d he said.<\/p>\n
\u201cI can certainly understand where people are coming from in their skepticism or seeing this as a bailout, and you know, I think if we have more details, we can kind of assess how much of a bailout it is,\u201d he added.<\/p>\n
The Greater Vancouver Area condo market is currently experiencing a correction. A report by the Toronto-Dominion Bank published earlier this month, forecasts roughly 15 per cent peak-to-trough decline from the 2023 high by mid-2027, marking the deepest correction on record since 2005.<\/p>\n
There are currently over 4,000 unsold condo units in Vancouver.<\/p>\n
During a press conference in Toronto on Tuesday, Housing Minister Gregor Robertson was asked why taxpayer funds should be used to bail out condo developers.<\/p>\n
Robertson\u2019s said the measure was one of many tools the federal government is using to drive housing supply.<\/p>\n
\u201cIn a time like this, when we have record levels of homelessness, we have people that can\u2019t access affordable rental apartments, and we have empty homes in Vancouver and Toronto, we need to take action on this and make the most responsible decisions with it,\u201d said the minister.<\/p>\n
\u201cThere will be more details on what that program is, in the near-term,\u201d he added.<\/p>\n
Jill Atkey, CEO of the BC Non-Profit Housing Association, views the B.C. government\u2019s latest move as disingenuous, given the provincial government this year cut funding for affordable housing.<\/p>\n
\u201cWe\u2019ve just been through a budget in February that actually\u2026deferred funding on nonprofit and co-op projects, that was committed funding,\u201d she said. \u201cProjects were in development and have now been pulled back, so it\u2019s a clear shift for us in terms of government priorities in British Columbia.\u201d<\/p>\n
Atkey said housing need is only growing in the province, with 125,000 affordable units needed over the next 10 years for households that are earning less than $50,000 a year. Atkey noted even under the previous provincial commitments, she said they were able to deliver 4,500 a year.<\/p>\n
\u201cWhen it comes to the condo conversion program, developers seem to be fine with making market returns when the market is doing well, and then to turn around and require a bailout when the market is not doing well,\u201d said Atkey.<\/p>\n
\u201cI think that\u2019s not where most British Columbians and Canadians are at in terms of tax dollar expenditures going into effectively bailing out the private sector when the market shifts,\u201d she said, adding that developers had a good market for 30 years and this will only add to Canadians\u2019 cynicism.<\/p>\n
Butler said the program will likely target leftover condo units that remain unsold in buildings and it\u2019s a misconception on the government\u2019s part that these units will sit empty forever.<\/p>\n
\u201cWhen some of these guys go into receivership, the receiver will auction off the units,\u201d he said. \u201cThere will be new, lower price discovery, and someone will buy them, and someone will live in them.\u201d<\/p>\n
Carolyn Whitzman, senior housing researcher and professor at the University of Toronto\u2019s School of Cities, said there have been examples of this type of program working in Canada and other jurisdictions, but the issue remains complex.<\/p>\n
\u201cThere\u2019s nothing wrong with acquiring unsold condos in the abstract,\u201d she said. \u201cIn the concrete, one, you\u2019d want the whole building, two, you\u2019d want to know what\u2019s the price per square foot, and does that translate into anything close to cost-based rent for the kind of people, the kind of income groups you\u2019re serving, like moderate income.\u201d<\/p>\n
Whitzman said Canada has fallen behind in non-market housing, which represents just three per cent of the market. She said Canada should look to France as an example of a jurisdiction doing it right, which had been in the same situation at Canada back in 2000.<\/p>\n
\u201cFrance decided that every municipality would have a 20 per cent non-market target, and that non-market target would be made up of new build and acquisitions, and also they\u2019d support renovations,\u201d she said, noting the government\u2019s consistent goal has been widely successful.<\/p>\n
National Post<\/p>\n
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