In a nation grappling with a historic housing shortage, the Canadian government, led by Deputy Prime Minister Chrystia Freeland, has introduced a bold new strategy. Starting January 15, 2025, Canadians will be eligible to refinance their mortgages up to 90% of their home’s improved value to fund the construction of secondary suites. This move seeks to address two issues simultaneously: helping homeowners manage rising mortgage costs while increasing the rental stock in high-demand areas. Yet, beyond these clear objectives, this new initiative reflects a wider trend—a recognition that Canada’s housing solutions must embrace adaptability and community-centric approaches.

Freeland’s announcement comes as no surprise to those who have been closely watching Ottawa’s efforts to stabilize the housing market. For years, rising property prices and high borrowing costs have kept homeownership out of reach for many. In recent times, mortgage rule adjustments have raised caps on default insurance and extended amortization periods to ease pressures on borrowers. But the decision to facilitate secondary suites goes one step further. It’s not just about making ownership more affordable; it’s about transforming our existing housing stock into multi-unit living arrangements that better serve both owners and tenants.

Under this new policy, homeowners can secure refinancing at a 90% loan-to-value (LTV) ratio, contingent on the total property value not exceeding $2 million. While some may raise their eyebrows at that figure, it becomes clear that the government aims to include as many Canadians as possible in this program—allowing not only modest homeowners but also those with more substantial assets to contribute to the rental market. Further, with a maximum amortization period of 30 years, borrowers can extend their repayment terms, making this investment in secondary suites more financially palatable. This setup recognizes the reality that housing investments are long-term ventures, and affordability is not solely about the upfront costs but also about the ongoing payments.

However, this isn’t merely an invitation to build willy-nilly. The regulations stipulate that homeowners can add up to four units on their property, and each unit must be fully self-contained, with its own living facilities, kitchen, and bathroom. The adherence to municipal zoning requirements underscores the need for these suites to function as independent, livable spaces. By mandating that these units remain long-term rentals, not short-term accommodations, the government is making a decisive stand. This is not about feeding the voracious appetite of the short-term rental market, as seen with platforms like Airbnb, which some critics argue have exacerbated housing shortages by diverting units from potential tenants to tourists. Instead, this initiative focuses on fostering long-term rental availability, aiming to bring stability to an otherwise volatile rental landscape.

While the focus on secondary suites is compelling, Freeland’s announcement also highlighted another critical aspect of the housing crisis: vacant land. It’s an open secret that in many Canadian cities, underutilized or vacant parcels of land sit idle, owned by individuals or corporations with no immediate plans for development. In response, the government has launched consultations on implementing taxes on vacant land. Provinces, territories, and municipalities are encouraged to provide feedback on how such taxes could be structured to incentivize land development. This concept isn’t entirely new—other countries, including Australia and the United States, have grappled with similar issues and have utilized vacancy taxes as a potential solution. Here, the idea is to push landowners to make productive use of their property, which ideally means more homes and fewer neglected lots in neighborhoods already starved for housing.

The government’s strategy also involves the Canada Public Land Bank, an initiative that has now expanded to 70 underused federal properties across the country. This land is earmarked for housing developments, ideally leading to more affordable housing options in cities struggling with skyrocketing prices. Such moves reflect a fundamental acknowledgment that there isn’t a single, silver-bullet solution to Canada’s housing crisis. It’s a multi-faceted problem, requiring a myriad of approaches, from incentivizing individual homeowners to encouraging broader land development.

Yet, as with all government initiatives, questions abound. Will the secondary suite refinancing program truly benefit middle-class Canadians? It’s a well-meaning plan, but it depends on the financial capacity of individual homeowners to take on further debt to fund these projects. Moreover, there is a risk that larger players in the real estate market—those with deeper pockets and access to substantial refinancing—might co-opt the program, edging out the very homeowners it seeks to assist.

As for the vacant land tax, it’s a solid idea in theory. However, without careful implementation, such a tax could have unintended consequences. Some landowners may choose to pass these costs onto consumers, potentially driving up prices in an already costly housing market. And there’s the question of how such taxes will be enforced at the municipal level, where resources and enforcement capabilities vary widely.

The use of federal land is perhaps the most straightforward of these proposals. Public land converted into housing is, quite simply, public good, and few could argue against it. But the government’s track record with large-scale development projects has been mixed, and one wonders if these new plans will translate into tangible housing options within a reasonable timeframe.

In sum, Freeland’s announcement is a timely reminder that Canada’s housing crisis is a complex web, woven together by issues of affordability, availability, and land use. The government’s new plan is a promising start. If executed well, it could encourage more Canadians to take an active role in alleviating the housing shortage while offering financial relief to homeowners. Yet, as always, the devil is in the details, and only time will tell whether these measures will pave the way to a more balanced housing market.

The Canadian government has taken the first step. Now, it’s up to Canadians to watch closely, engage thoughtfully, and ensure these plans translate into meaningful change.

– Kai T.