The Canadian Mortgage and Housing Corporation (CMHC) is Canadas national housing agency.
The front page of their website says this:
Backed by more than 65 years of experience, we work with community organizations, the private sector, non-profit agencies and all levels of government to help create innovative solutions to today’s housing challenges, anticipate tomorrow’s needs, and improve the quality of life for all Canadians.
This is a bit vague, but let’s assume ‘today’s housing challenges’ includes the availability of affordable housing for all Canadians.
With this goal in mind there are two ways you could use government money to create incentives for housing: The supply side or the demand side.
CMHC works on both sides, but over the years they’ve shifted the bulk of their support to the demand side. This means that instead of directly funding the construction of housing or providing incentives to builders, they provide support to the buyer mainly in the form of mortgage insurance for risky loans. Of course this support is actually provided to banks to make their loans risk free, but the end result is that more people are able to pay a higher price for housing due to more availability of credit.
In concert with record low interest rates and a speculative mania this has driven housing prices to record highs in Vancouver and inflated prices across the country leading to talk of a national Canadian housing bubble similar to that seen in the US.
If we really want to use government to assist in the creation of affordable housing shouldn’t we be providing incentives to the supply side instead? It shouldn’t be a stretch to understand that building more housing and providing less credit to home buyers would drive prices down making homes MORE affordable.
But nobody really wants to drive prices down do they? So instead we get vague statements about housing challenges and smoke and mirrors attempts to improve ‘affordability’ by providing ever cheaper credit.
That hasn’t worked in any housing bubble yet, but hey! Maybe it’s different here!