Further intervention in housing markets unjustified, says new CHBA president

LAKE LOUISE, AB, March 8, 2013 /CNW/ - The federal government should refrain from further intervention in the housing markets by adjusting mortgage lending rules, the Canadian Home Builders' Association (CHBA) said today.

In his inaugural address to the 70^th National Annual CHBA Conference here, Incoming President Deep Shergill of Calgary said that such intervention represents "a hammer" that impacts all housing markets, both those that are healthy and those yet to fully recover from the recession.

He called on the government to be prepared to take remedial action if housing activity falls below demographic demand or if price stability is threatened.

"It seems less than forthright to constrain consumers' ability to buy a new home - a real asset, while allowing usurious credit card interest rates to bury many consumers in non-asset backed debt," Mr. Shergill said.

He said working to maintain a stable financing environment would be one of seven priorities in his plan of action for the coming year.  The others are regulation, government-imposed costs, a skilled and productive workforce, land availability, market intelligence and investment in research and development.

Mr. Shergill said Canada Mortgage and Housing Corporation (CMHC) has played a central role in maintaining stability in mortgage markets since the financial meltdown of 2008.  "We are extremely pleased that the federal government recognizes the Corporation's continued effectiveness."

The industry's success in improving energy efficiency illustrates the benefits of collaboration with government in research and development.

A CHBA analysis of the energy performance of an Ottawa home built in 1975 compared with one built today shows a 66 per cent improvement.  Comparing similar models of family cars over the same period showed a maximum improvement in energy efficiency of 16 per cent.

"When it comes to energy efficiency, new home builders have outperformed the auto industry by a factor of four," Mr. Shergill said.

Mr. Shergill said it's time to roll back the chronic over-regulation of the new home building industry. He cited personal experience to illustrate one aspect of bad regulation.

He said he was able to launch his own business 22 years ago with $18,000. "Today, in some jurisdictions, I'd need closer to $1 million to do the same thing - 55 times as much capital. Simply put, today an ambitious young builder cannot enter the industry easily, if at all."

Government-imposed costs are pushing house prices ever higher and must be rolled back and reduced, Mr. Shergill said. "So long as governments persist in confusing the effect of low interest rates with real housing affordability they will fail to recognize the steady erosion of housing affordability."

The same pressures that add to the cost of a new home also inflate the value of existing homes, with no value-added. As a result there is a multiplier effect through the resale housing market every time a new charge, fee or levy is applied to new development.

In some urban centres the relationship between house prices and household incomes has reached a crisis point.

The growing underground economy is also a result of the rising tax burden on housing.

In consultations on the federal government's plan for long-term infrastructure, Mr. Shergill said the CHBA has pointed out that calls for new development to pay its own way deflect from the failure of politicians to invest in basic infrastructure over many decades.

"What some call an infrastructure deficit should more correctly be recognized as a legacy of failed leadership. Requiring new development to pay for bad decisions in the past is unacceptable."

The CHBA hopes the next federal budget will outline a national plan for infrastructure investment that will give priority to housing affordability and choice.

Mr. Shergill, a member of CHBA since 1998, is President of Prominent Homes Ltd. of Calgary.

The Canadian Home Builders' Association (CHBA) is the national voice of the residential construction industry, representing more than 8,000 member firms across the country. Membership comprises new home builders, renovators, developers, trade contractors, building material manufacturers and suppliers, lenders and other professionals in the housing sector.

SOURCE: Canadian Home Builders' Association

John Kenward
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