Ottawa’s new mortgage rules will drive up rents in Toronto: study

The Globe & Mail:

Recent reforms to mortgage-insurance regulations announced last week by federal Finance Minister Bill Morneau will likely only add fuel to Toronto’s overheated rental market, Mr. Hildebrand said.

He estimates that the typical buyer will need to earn $86,000 a year to afford a condo under stricter mortgage qualification rules that kick in on Monday, a 17 per cent increase from $73,000 under the existing laws. That will push some prospective buyers into the rental market instead.

New regulations effective Nov. 30 will prohibit mortgages on investment properties from being covered by government-backed insurance, which could make financial institutions less willing to lend to condo investors.

Combined, the changes are likely to drive up demand for rental units while shrinking the supply of new rental investors, Mr. Hildebrand said. “It sort of seems to be to be the wrong time to be doing this,” he said. “Even before the changes come into effect, we’re seeing the lowest level of supply in the rental market that we’ve seen in years.”

Now people can be priced out of renting, in addition to owning. A real victory for all city-bound Torontonians.

CMHC again moves to tighten mortgage insurance rules as housing market cools

The government continues to engage in (somewhat) quiet actions to reduce its exposure to a mortgage or more general financial crisis. At this point we’ve seen shifts in EI, routine concern about Canadian debt levels and risk of increased interest rates, and now tightening of the mortgage insurance rules. CMHC’s decision parallel’s former Minister Flaherty’s earlier comments, summarized as:

Former finance minister Jim Flaherty had also expressed concern that CMHC had become too large a player in the market, needlessly exposing Canadian taxpayers to risk should there be a housing crash. The agency currently has about $560 billion in outstanding mortgage insurance on its books.

When/if there is a mortgage crisis in Canada that leads to substantial job loss, I don’t think Canadians are going to be thrilled by how their social infrastructures have been quietly reshaped around them. Or the relative lack of monetary policies that are the result of long-term low interest rates. Let’s hope nothing happens to make Canadians practically realize the implications of the past 3-4 years EI, monetary, and now CMHC changes.