Ottawa, B.C. spending $3.2 billion to ease new home costs

The federal and B.C. governments will spend up to $3.2 billion to help reduce homebuilding costs by cutting development charges and converting unsold condominiums.

Ottawa will provide B.C. with $1.6 billion to help fund the province's infrastructure, and the province will match the funding. The total $3.2 billion in financing will be provided over 10 years to expand infrastructure. Municipalities that receive the funding will be required to reduce development charges by up to 50 per cent for three years.

Prime Minister Mark 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.

About 2,500 newly built condos in British Columbia are sitting empty with no buyers. Investors used to account for the majority of new condo purchases, but a decline in the housing units' profitability has caused them to lose interest, leading to a drop in sales, buyer defaults and scores of unsold product.

"With higher interest rates, weak investor demand, developers are stuck," Carney said. "They do not want to sell at a loss, but they also cannot afford to hold the empty units indefinitely."

Through the new partnership, the two governments will use financing tools from Ottawa's new housing agency, Build Canada Homes, to "convert thousands of vacant condo units into affordable homes." The Prime Minister's remarks did not provide specific 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.

Developers said the announcement would help. "It will help to reduce the cost of delivering new homes, ultimately leading to price improvements," said Neil Chrystal, president with Polygon Realty Ltd.