Is CMHC to Blame for Canada’s Housing Bubble?
When it comes to the bubble that Canada’s housing market may or may not be in, there’s a lot of blame to go around. Some are blaming the banks, some are blaming imprudent borrowers, some are blaming foreign investors, and some are blaming the government! This latter is what the Jesse Kline of the National Post is doing, saying that it’s the government’s responsibility to privatize the Canadian Mortgage and Housing Corporation in order to get a grip on our housing situation and start holding the banks accountable to themselves.
It’s not really a bad idea, what Kline is saying. He believes that with CMHC insuring 90% of mortgages, there simply is no responsibility on the banks when they’re handing out Canadian and Ottawa mortgages, and that this is where the real fault of Canada’s housing market lies. With the responsibility currently falling on the government’s shoulders through this Crown corporation, it’s really being left to the taxpayers to pay mortgages that have defaulted, and not the banks.
But, Kline has a solution.
It’s as easy as privatizing CMHC, something that a few have called for before in Canada. By making CMHC a private company, and not a Crown corporation, the responsibility of paying defaulted mortgages would fall on an actual, tangible company – and not the Canadian masses paying taxes. In addition to that, says Kline, the biggest factor in privatizing CMHC would be that it would take away the government’s responsibility of pricing risk – something Kline doesn’t think they can do accurately. A private company on the other hand, would be able to do so much more appropriately, and therefore lessen the amount of risk to themselves, to homebuyers, and to the Canadian housing market. This does seem to be a better alternative than limiting foreign investing, which brings millions of dollars into the country every year; and that is also something others have suggested in order to correct the current housing market.
To say that the government is entirely to blame for our current housing market is a bit of a bold statement. After all, Jim Flaherty has changed mortgage rules several times, touching on everything from shorter amortization periods to new rules on home equity loans. It’s clear that our government is trying to do what they can, without completely limiting our rights to home ownership. But, privatizing a company that does currently hold so much risk, and allows those who are least able to afford it to take out a mortgage, might be a reasonable solution that everyone can live with.