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Prime Minister Mark Carney shakes hands with construction workers at a construction site in Vancouver on Thursday.Chad Hipolito/The Canadian Press
The federal and B.C. governments will spend up to $3.2-billion to help reduce homebuilding costs by cutting development charges, and they plan to help developers get rid of their unsold condominiums in the province.
The joint housing announcement on Thursday is Ottawa’s latest attempt to bolster the troubled homebuilding sector and condo market. Ottawa said about 2,500 newly built condos in British Columbia are sitting empty with no buyers.
Investors used to account for the majority of the new condo purchases, but a decline in the housing units’ profitability has caused them to lose interest. That has led to a drop in sales, buyer defaults and scores of unsold product.
“With higher interest rates, weak investor demand, developers are stuck,” Prime Minister Mark Carney said in prepared remarks for an infrastructure announcement in Vancouver. “They do not want to sell at a loss, but they also cannot afford to hold the empty units indefinitely.”
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Through a new partnership, Mr. Carney said, the two governments would use financing tools from Ottawa’s new housing agency, Build Canada Homes, to “convert thousands of vacant condo units into affordable homes.”
“The problem is that these empty homes do not just sit idle,” Mr. Carney said in his prepared remarks. “They also disincentivize new construction, unsettle lenders and investors, and create a housing market that is, in effect, frozen.”
The Prime Minister’s remarks did not provide details on the financing tools, or specify whether the government would purchase the unsold condo units from developers or provide them with other support to do conversions.
Mr. Carney also announced an initiative similar to a new program in Ontario that will cut development charges, which are fees municipalities impose on developers to build infrastructure such as roads and sewers for new housing developments.
Those charges have spiked across the country, saddling developers with hefty fees on top of their construction expenses. That in turn has driven up the cost of new housing.
Ottawa will provide B.C. with $1.6-billion to help fund the province’s infrastructure, and the province will match the funding.
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The total $3.2-billion in financing will be provided over 10 years to expand infrastructure. The municipalities that receive the funding will be required to reduce development charges by up to 50 per cent for three years.
Mr. Carney said the reduction in development fees could cut costs on a new unit by up to $40,000, which would make it more affordable for homebuyers.
Developers agreed. “It will help to reduce the cost of delivering new homes, ultimately leading to price improvements,” said Neil Chrystal, president with Polygon Realty Ltd.
On the condo conversions, Mr. Chrystal said he believed the governments would use federal funding to buy completed condo inventory from developers.
The aid for the development sector arrives several months after the federal government and Ontario announced measures to boost homebuilding in the country’s most populated province.
Ottawa and Ontario are spending $8.8-billion to help municipalities reduce development charges by up to 50 per cent. The two governments are also providing an HST rebate for buyers of newly built homes, which is designed to help clear the thousands of unsold new condos in Ontario.