“The basic questions still have no real answers. Whose units get bought? At what price per unit? Through what process?”
—Chris Gardner
Prime Minister Mark Carney joined B.C. Premier David Eby this month to announce a partnership to buy more than 2,200 unsold condos in British Columbia and convert them into “affordable” homes. A few days later, Carney explained it would be a “rent-to-own” program under a right-to-own framework. Eby said no units would be purchased in the City of Vancouver.
The condemnation from all sides was swift. Critics called it a developer bailout. Developers said they never asked for it. One national newspaper called the plan “ridiculous” and “myopic.”
The Prime Minister’s response to criticism of the so-called “condo bailout” was swift. The idea was “initiated” by the B.C. government. So while we may not know much about what this program is, at least we know who is driving it: David Eby.
Eby called the bailout “the preferred solution of the development industry.” Let’s be clear, not one homebuilder, contractor, or developer I know asked government to buy their unsold condos. In fact, Carney himself conceded no developer lobbied him “directly.”
This isn’t an industry rescue plan. It’s an expansion of something David Eby has been doing for months: using BC Housing to buy up completed units. In February, for example, the province bought more than 150 units in two newly built apartment buildings in Vancouver and Langley and engaged non-profits to run them.
There are two very different propositions bundled into this announcement, and they deserve separate analyses and verdicts.
The first initiative, while not perfect, is sensible. Ottawa and Victoria are putting $3.2 billion over ten years into housing, enabling infrastructure and lowering municipal development charges on new homes by up to 50 per cent, or as much as $40,000 a unit. Municipalities own roughly 60 per cent of Canada’s public infrastructure, yet collect just eight cents of every tax dollar. This is a long-overdue step in the right direction—do more of this.
In Ontario, cities are already responding to a similar program. Windsor offered to slash building fees by up to 70 per cent in exchange for federal and provincial dollars.
But the second proposal to buy 2,200 vacant condos is a gross misuse of tax dollars.
As of May, Metro Vancouver had 4,376 completed, unsold condos, the highest level since records began in 1990. That sounds like a problem and, for sellers, it is. But for buyers and renters, it’s the best news in years. When sellers have to compete, prices fall. That’s what’s happening now. Prices of homes and condos, as well as rents, have been declining sharply over the past 18 months—the market is correcting.
The NDP government wants to step in. But to what end?
Here’s the problem. Carney and Eby now say they’ll target “distressed” condos and buy them “at a discount.” Eby called it an opportunity to buy homes at below construction costs with no burden on taxpayers because the mortgages will be assets for government.
Forgive the skepticism.
A buyer with 2,200 cheques to write, unlimited borrowing, and a political deadline, is not likely to drive a hard bargain. Even if every unit is bought below asking, scooping up that much supply will prop up prices across the entire market, not just the units purchased. Why would any government do that in the least affordable market in Canada?
The basic questions still have no real answers. Whose units get bought? At what price per unit? Through what process?
The governments now say the details won’t come until the fall—after the money is committed. Eby’s complaint that the “plot has been lost” is laughable. This is his plan and his announcement. If there are no details and a missing narrative, that’s his doing, no one else’s. It’s typical of this government: billions doled out on little more than a scheme sketched on the back of a napkin.
Then there’s the principle of the thing.
Risk is part of the industry
Developers take a risk on every project. Some are successful, others not so much. Shielding a select few from losses with public money isn’t the job of government. Never mind that government’s track record for picking winners and losers in the economy is littered with boondoggles that have cost taxpayers dearly.
Look no further than the recent foray by Canadian politicians into the EV battery file in Ontario and Quebec. The federal and provincial governments pledged billions in subsidies. Soon after, Stellantis sold its stake in one plant, Honda shelved its plans for a mega-hub, and Northvolt went bankrupt.
To no one’s surprise, taxpayers have been left holding the bag.
What stings most is that for more than a decade, builders have been offering solutions that governments have chosen to ignore. The easiest ones would cost government nothing: stop changing building codes, harmonize the rules across jurisdictions, and make them simpler. Codes change far too frequently, and every change brings another layer of complexity and cost.
What governments could also do is partner with cities to help shoulder the cost of municipal infrastructure and link funding to commitments by cities to reduce development cost charges and fees.
In the meantime, the bottom line is pretty simple: governments shouldn’t borrow money to buy condos.