Prime Minister Justin Trudeau has asked Finance Minister Bill Morneau to consider changes to the mortgage stress test that Canada’s real estate industry has criticized for being a drag on the housing market.
A mandate letter sent by Trudeau to Morneau — which was released Friday, along with letters sent to other ministers — says the finance minister will “review and consider recommendations from financial agencies related to making the borrower stress test more dynamic.”
The review was not among the commitments the Liberals made during the fall federal election, but the Conservatives had pledged to “fix” the test to help first-time homebuyers and those renewing their mortgages. Trudeau and the Liberals will need support from the other parties to pass legislation after having their majority in the House of Commons reduced to a minority in October’s vote.
Canada has stress tests in place for home loans that are insured against the borrower defaulting on their payments and those that are not. The insured test was brought in by the finance ministry, while the uninsured one was instituted by a federal banking regulator, the Office of the Superintendent of Financial Institutions.
It was not specified which test the mandate letter refers to, but both can require borrowers to qualify for loans at higher rates than the one on their contract, as it is intended to ensure buyers can meet their obligations to lenders if interest rates rise or if a person’s income is lost or reduced, among other things.
The implementation of the uninsured test, though, particularly irked the real estate industry. One criticism of the measure is that it was not adjusted following a rise in interest rates, which is also putting pressure on borrowers.
Home sales held steady in October, the Canadian Real Estate Association said in a November press release, but the group’s president said this “hides how the mortgage stress-test remains a drag on many local housing markets where the balance between supply and demand favours homebuyers in purchase negotiations.”
Morneau’s mandate letter requires him to help carry out one of the Liberals’ other key campaign commitments: a one per cent annual vacancy and speculation tax on applicable properties owned by non-resident non-Canadians.
“This would involve working with provinces, territories, municipalities and law enforcement to track housing ownership and speculation,” the letter states.
The top parliamentary priority is to be the Liberals’ latest middle-class tax cut, which would increase the basic personal income tax exemption by around $2,000 to $15,000. Another tax cut is to be delivered to firms that make “zero-emission” technology. Morneau will cut tax rates by 50 per cent for these companies, according to the letter.
Corporations could face new tax rules as well. The letter calls for Morneau to update anti-avoidance rules “to stop large multinational companies from being able to shop for lower tax rates by constructing complex schemes between countries” and to “close corporate tax loopholes that allow companies to excessively deduct debt to artificially reduce the tax that they pay.”
As promised in the Liberal platform released for October’s federal election, the finance minister is being ordered to bring in a new 10 per cent tax on luxury boats, cars and personal planes worth more than $100,000.
Meanwhile, Morneau is to stick to four key principles for implementing the government’s fiscal plans: reducing debt-to-GDP; preserving Canada’s triple-A credit rating; continued investment in “people and in the things that give people a better quality of life” and preserving “fiscal firepower” in case of an economic downturn.
Morneau’s mandate is just one of many that were handed down by the prime minister. Orders to other ministers include:
- Deputy Prime Minister and Minister of Intergovernmental Affairs Chrystia Freeland: Take the lead in ratifying the new NAFTA; spearhead work with provinces and territories on wiping out internal trade barriers.
- Minister of Innovation, Science and Industry Navdeep Bains: Use “all available instruments” to drive down the average cost of cell phone bills in Canada by 25 per cent.
- Minister of Small Business, Export Promotion and International Trade Mary Ng: Cut the cost of federal incorporation by 75 per cent, to $50 from $200; eliminate the “swipe fee” on HST and GST for credit transactions; create the “Canada Entrepreneur Account,” which would give up to 2,000 entrepreneurs a year as much as $50,000 apiece to launch a business.
- Minister of National Revenue Diane Lebouthillier: Boost existing programs for whistleblowers who provide information about tax avoidance and evasion based on international best practices.
- Minister of Health Patty Hajdu: Continue to work on establishing national universal pharmacare; address the rise in youth vaping with new regulations; “continue to implement the strict regulation of cannabis across Canada” alongside the public safety minister.
- Minister of Labour Filomena Tassi: Increase federal minimum wage to at least $15 per hour; craft protections for employees working via digital platforms; help with giving federally regulated workers a “right to disconnect.”
- Minister of Canadian Heritage Steven Guilbeault: Create new rules for social media platforms, beginning with a requirement to remove illegal content within 24 hours; along with other ministers, put in place new “online rights,” such as the right to knowledge about how personal data is being used; support local journalism, “and develop business models that facilitate private giving and philanthropic support for professional journalism and local news.”
- Minister of Natural Resources Seamus O’Regan: Find ways to help workers and companies in sectors looking to export their goods abroad, which includes the completion of the Trans Mountain pipeline extension; “develop strategies to help strengthen the competitiveness and overall health of Canada’s forest sector.”
- Minister of Transport Marc Garneau: Work with infrastructure minister on “high frequency rail” for the Toronto-to-Quebec City corridor; finish a review of port modernization “with an aim to update governance structures that promote investment in Canadian ports.”
- Minister of Economic Development and Official Languages Mélanie Joly: Set up a new technology and commercial support fund.
• Email: gzochodne@nationalpost.com | Twitter: GeoffZochodne
