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The unconventional step comes as policymakers scramble to respond to surging home prices in Vancouver and Toronto that have turned Canada into one of the world’s fastest-appreciating real estate markets. Households have racked up a record $2 trillion in debt amid rock-bottom borrowing costs, triggering concerns about the stability of the financial system.

‘Ample Support’

Yet just two weeks earlier, the head of Canada’s housing agency warned against the wrong kind of help.

“Ample support exists already for first-time homebuyers,” Evan Siddall, president of Canada Mortgage and Housing Corp., said in a speech in Vancouver. “Too much encouragement to buy homes exposes vulnerable people to excessive financial risk, pushes prices higher where acute supply inelasticity exists – like here in Vancouver – and jeopardizes our economic prospects.”

Worse, those poor buyers will end up paying higher property taxes than they would’ve otherwise

Policy measures to cool the market have all addressed demand, not supply. They include a 15 per cent tax of foreign buyers in B.C., stricter federal government mortgage rules, and plans to tax empty homes in Vancouver.

Supply, on the other hand, has stalled, failing to respond to a nearly 40 per cent increase in Vancouver prices earlier this year. The inventory of homes for sale is at its lowest in almost a decade, even as the price of a typical single-family home surged to $1.5 million, about 20 times what the median household earns in a year.

Facing Election

B.C. Premier Christy Clark, whose Liberal Party faces re-election in May, insisted the new program doesn’t encourage risky loan taking, saying only those who meet the newly tightened federal mortgage rules will qualify. It will also be restricted to households earning up to $150,000 and purchasing a property that’s worth $750,000 or less.