This year’s federal budget was largely utilized as a Lavscam distraction technique and it failed to distract. That is largely good news.
Prime Minister Justin Trudeau wanted everyone to stop talking about the SNC-Lavalin affair and focus on how they were going to make life better for [insert your special interest group here].
Few bought it and commentators across the country didn’t spend much time on it.
There is though one new announcement in the budget that I want to take another look at given what it means for society more broadly. Through the Canada Mortgage Housing Corporation the government is planning on giving people $1.25 billion over the course of 3 years in down payment money to help them purchase a home.
You can get 10% towards a new build and 5% on an existing home. They’re calling it a “shared equity” payment because you have to give the money back, but not until the property is sold.
So it’s basically free money.
Plus it’s not like the government, in taking on 10% of the equity, will also receive 10% of the capital appreciation when it’s sold. You just give them back the 10%, pocketing the appreciation that was made on the entire value of the property. Nice deal if you can get it.
And the deal, we’re told, is targeted towards middle-class millennials. It is not a program for, say, helping lower income rural residents own modest homes (there are already regional programs for that across the country). The income cap for this program is $120,000 per year and the cap on the mortgage value is four times your income, as in no more than $480,000. Now that doesn’t get you a lot of house in downtown Toronto – in fact it doesn’t get you any “house” in Toronto – but it does get you at least a one bedroom condo, which is also eligible for this program.
It’s one thing to have programs to help low income people with housing needs, it’s another to help middle-class millennials.
I can tell you from experience, speaking with many people in their 20s and 30s in Toronto and Ottawa and elsewhere, that real estate remains the hottest dinner conversation topic. But so what? Just because everyone is complaining about the price of housing doesn’t mean the government needs to step in and cough up that money.
We don’t need the government to step up anytime a topic is trending. Millennials are also clamouring for another season of Game of Thrones – should the feds also fund that? (On second thought, let’s not give them any idea.)
The budget docs argue the fund will “include eligibility criteria to ensure that the program helps those with legitimate needs while ensuring that participants are able to afford the homes they purchase.”
Is someone who makes $120,000 but hasn’t saved up for a down payment for whatever reason someone with “legitimate needs” for government assistance?
This program is everything that is wrong with millennials today.
Why does one middle-class person deserve a down payment from taxes paid by another middle-class person? Picture two people in their early 30s. They both earn, let’s say, $80,000. One of them is frugal and pinches every penny. That person finally saves up enough money for a down payment to buy a condo. The other spends big time on consumer goods and eats out at fancy restaurants every day. That person saves up nothing for a home but can buy one at exactly the same time as the other person because of this government program. How is this scenario fair?
While it’s true that young Canadians are facing a variety of challenges in the current economic environment, it’s also true that they’re just making different choices than previous generations.
Here’s an example: When I was a kid growing up in the 1980s, we almost never went out for dinner. It was something you only did on a special occasion. Now people dine out all the time. A recent study found that 72% of Canadians dine out “more than few times a month. The survey also found 50% of people buy coffee on a daily basis. When I entered the workforce I was initially eating lunch out everyday but clued into how bad of a habit this was and instead brought inexpensive lunches and instead invested my money. I later used that fund to buy my first house.
Instead of tossing money at middle-class people to help them buy their homes, let’s instead ramp up financial literacy and promote fiscal responsibility.
That said, don’t hire the politicians and bureaucrats to teach the courses.