OTTAWA — Criticism is mounting for a proposed federal-provincial program that would acquire unsold condo units in British Columbia and convert them into affordable housing.
Critics Decry 'Moral Hazard'
“It’s moral hazard, it’s socializing losses while the profits flow to developers, so developers can only win, the government will come and bail them out, which is crazy,” said Ron Butler, principal broker at Butler Mortgage Inc. and host of the Angry Mortgage Podcast.
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’s housing sector, including lowering development charges and supporting infrastructure projects.
Details of the Condo Conversion Plan
One of the measures also included what’s called the “Canada-British Columbia Partnership on Condo Conversion” which would see Build Canada Homes and BC Housing partner up to “convert” 2,200 unsold condo units into affordable housing.
Carney said developers “can’t sell at a loss” and weaker investment demand has made them “stuck.”
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 “innovative financing tools” would be used in the endeavour.
Lack of Transparency
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.
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.
“I 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,” he said.
“I 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,” he added.
Market Correction Context
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.
There are currently over 4,000 unsold condo units in Vancouver.
Government's Defense
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.
Robertson’s said the measure was one of many tools the federal government is using to drive housing supply.
“In a time like this, when we have record levels of homelessness, we have people that can’t 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,” said the minister.
