The "easy wins" in Nova Scotia housing policy
How to make a difference when you don't care to spend (much) money
There are rumours of an early provincial election, with Premier Houston likely hoping to sneak in another mandate before Prime Minister Justin Trudeau leaves - removing a big, unpopular, blame-able target. So on top of an October municipal election, there may be a provincial election as well.
Before criticizing provincial housing plans, I thought I should offer some ideas first. I’m going to argue for two policies that could help on housing, with the constraint that they cost very little money for the province. That’s because none of the provincial political parties are wiling to talk billions with a “B” on funding non-market housing. Especially for the governing PCs, they clearly rather focus dollars on healthcare. It is what it is, so what else can be done?
The Bus Rapid Transit Bankshot
Halifax has an underdeveloped transit network, a 1950s road network, and a surging population who overwhelmingly tend to drive around. So better transit is essential to keeping everyone moving. But what does transit have to do with housing? Well, the federal government has tied the two: any new funding for high frequency transit will have housing strings attached.
To get new funding, cities need to:
Eliminate all mandatory minimum parking requirements within 800 metres of a high-frequency transit line.
Allow high-density housing within 800 metres of a high-frequency transit line1.
Allow high-density housing within 800 metres of post-secondary institutions.
Complete a housing needs assessment for all communities with a population greater than 30,000.
With Halifax’s BRT plan, 800 metres from the stations covers…a lot. Nearly the entirety of the peninsula falls within an 800 metre “walkshed” of a BRT stop, as well as important parts of Dartmouth, mainland Halifax and down towards Spryfield.
In HRM’s 2020 Rapid Transit Strategy, the BRT plan was estimated at about $200 million. That said, the same document expected a $120mn cost for several new ferry routes. The new Mill Cove ferry will cost $259m for one route. But lets roll with the ferry ratio (2.5x) and say the BRT plan today would cost about $400mn.
The ferry also came with 60%-25%-15% cost sharing ratio across the feds, the province, and HRM respectively. From a provincial perspective, securing the BRT may cost as little as $100mn (25% of $400mn)2, and would trigger generational housing reforms, while appearing to play nice with Halifax. After all, these are federal rules! Dodge the politics, but get the job done.
Sweet, Cheap Stimulus
Like or not, no political platform is complete without a dollop of demand-side stimulus. These measures, like extending mortgage amortization (federal), or down payment assistance programs (provincial) are great politically because they visibly help new home buyers afford high house prices, but also tend to undergird existing owners’ home values (by helping new buyers afford bigger mortgages). Helping young families is nice, but securing seniors’ nest egg is existential.
Nowadays, with high prices and high interest rates, new homebuyers are historically stretched (and home sellers still want peak pricing). Nationally, half of new homebuyers have a risky debt-service ratio, up from ~20% pre-COVID. Meanwhile, only a quarter of investors are similarly stretched, it’s no surprise that investors have increasingly been lobbing the winning bids on homes.
That’s why I’m returning to my hobby horse - the Capped Assessment Program (CAP). The CAP limits property tax assessment increases to inflation, but the assessment resets to market value upon sale. Right now in Halifax, CAP’d assessments are on average just two-thirds of market assessments. That means that a typical homebuyer in Halifax can expect to pay 50% more in property tax than the seller is currently. On a typical $2,200 property tax bill, that means about $100 a month. That’s an average, many buyers will face hundreds of dollars a month in added taxes.
So, the reform would simply be to allow First Time Home Buyers to keep the sellers CAP’d assessment (or phase out of it over 10 years?). This gives an immediate boost to how big of a mortgage the new buyer can afford, and give them a real edge against the dreaded real estate investor (who would take the big tax hit). Best of all, to a rough approximation, this costs nothing, especially in year zero. It simply bends down the future curve of taxable property assessments, denying municipalities tax revenue they probably wouldn’t raise anyway. Halifax has repeatedly cut it’s property tax rate (which is what cities do when assessments rise “too much”). They don’t even want the tax revenue!
So, two cheap reforms, one to unlock more housing in Halifax, and another to help home buyers afford bigger mortgages, at little cost. Better than some of the housing plans I’ve seen, but that’s a topic for a future blog.
The rest of this argument relies on how you define “high-density housing”
For context, the province got a surprise ~$400mn swing in their budget, to land in a surplus after expecting a deficit, so the BRT is well within the margin of error for budgeting