May 13, 2019 10:50 pm

Lethbridge group calls for city to act on provincial, federal levels on mortgage stress test

WATCH: (Oct. 1, 2018) A vital lesson for Canadian mortgage owners looking to borrow money

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A Lethbridge non-profit has requested that the mayor write letters to both the provincial and federal governments regarding the federal mortgage stress test.

Building Industry and Land Development Association (BILD) Lethbridge Region made the request in a presentation to city council Monday, after conducting an investigation and crafting a report to quantify the impact of the stress test on the Lethbridge housing market.

BILD speaker Bridget Mearns, executive officer and former Lethbridge city councillor, said her group found three main factors that influence the market: the economy; housing prices, which are affected by inventory; and mortgage rules.

READ MORE: Rates are up, prices down. How tough is the mortgage stress test across Canada today?

“The biggest mortgage rule to affect this industry is the stress test,” Mearns said.

The findings of the BILD report indicated:

  • New home sales are the lowest since 2001.
  • Residential resale dropped 3.6 per cent from 2017 to 2018.
  • Unabsorbed new homes inventory is above the 10-year average and has increased 11 per cent from 2017.
  • Following the stress test, home-buyers in Lethbridge saw their purchasing power decrease by 17.3 per cent, and an additional 5.5 per cent due to rising interest rates.
  • Housing starts dropped by 27 per cent from 2017 to 2018.

  • Story continues below

“Home sales are way down, specifically in new construction,” said Mearns. “The problem with that is it means there is a rising inventory out there, which means there are less builds happening.”

“When there are less builds happening there is less employment for trades, construction, sub-contractors, and other small businesses, so it affects a variety of people in a variety of industries… so no builds can equate to job losses and affect the local economy.”

In the BILD presentation Monday, the call went out for council — and Lethbridge Mayor Chris Spearman — to take action, both provincially and federally.

WATCH: (May 1, 2018) How mortgage stress tests are affecting millenials

“We have a responsibility to advocate for organizations in the community who make a significant difference,” said Spearman of the BILD presentation.

“Laying people off at the beginning of construction season… that’s cause for concern.”

“We have established that one of the main reasons for that is close to a 20 per cent loss in purchasing power for potential home-buyers,” said Spearman, “[which is] related to a mortgage stress test that is unnecessary in this area.

“Having an artificial barrier to homeownership does nothing in terms of enhancing the economy. It’s an unforced error, it’s self-inflicted, and it’s something that we can resolve.”

BILD’s proposal is for the mayor to first write a letter to the new provincial government advocating for the development of policies that would allow Alberta-regulated financial institutions — ATB and credit unions — to implement lending practices based on the region’s economic conditions, and not use the stress test.

READ MORE: Mortgage stress test continues to impact Sask. real estate market

“This is a federal initiative,” said Mearns. “Provincially, we have banks in the province that don’t fall under that federal jurisdiction, so they are free not to follow it.”

“We are asking the provincial government to look at what they control, and not have them apply this federal mandate that they don’t have to.”

And according to Mearn, it’s already on the UPC radar.

WATCH: (Sept. 29, 2018) This is what you should know ahead of renewing your mortgage

“We also know that with this new government, in their platform they specifically talked about this issue. So I think we do have a government that understands what this issue is, and there seems to be the desire to move it forward, so I hope that’s the case. Having a municipality and the support behind us certainly makes that more powerful.”

“I really am optimistic that there is an opportunity provincially to have a ‘made in Alberta’ solution.”

Both Mearn and the mayor shared the sentiment that it is time for the major municipalities in the province to band together and advocate against the mortgage stress test, an initiative that was designed to address two overheated housing markets in Vancouver and Toronto, but that they say doesn’t make sense in Alberta.

“We’re going to advocate with our fellow cities,” said Spearman, “[who are] all feeling the same stress, all seeing the same things happening.”

“The thing that’s probably the most amazing to me is that they would put a rule in place that would affect two of our largest markets,” said Mearns, “and not think that it would have an effect on other housing markets across the country.

“There really is no uniform housing market; it’s region by region.”

 

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