CMHC - Liberals Recent Changes to the Rules

The challenge of bubbles forming in the Real Estate market is very difficult to regulate. CMHC and other countries’ equivalents have errored in that they have elevated both confidence of lenders and the availability of credit, thereby, to some degree distorting the market. There is no question that insuring mortgages reduces risk to lenders and by extension credit becomes both more widely accessible and more readily available. There is no question that Credit makes real estate more accessible, increases demand and elevates price.  It is more the case that government can exacerbate cycles in the real estate market, than it will ever be able to control cycles, or in any real way regulate markets away from cyclicality; save perhaps in the use of the draconian measures that were forwarded in the 1970’s by the then Liberal government in the form of wage and price controls – a disastrous policy foray that should be avoided with extreme prejudice.

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One wonders what affect the recent bid by the new government at cooling the housing market will really have. One understands, that while it will be sometime before there is upward pressure on interest rates, that interest rates will rise and inherent in that reality is a “national” risk of widespread over extension  amongst the population holding large mortgages. How is this policy going to help. This will have little or no effect on the overall challenge; policy only makes sense when policy is effective. The government would be much better off issuing a payment matrix at the time of mortgage issue that shows the payment at today’s rates and the payments at 2 point intervals to 18%, the highest number I remember from the dirty 80s. This policy is false comfort at best.

What values are being exalted at the chosen price point; it is okay to have a $500,000 home, but $650,000 home is different – how?

CMHC as an agent to help young people get their foot in the housing market is a good thing, CMHC should be aggressive as it can be in helping New Entrants to the market. CMHC has a limited role to play in some other areas of the market as well – but in the main, lending intuitions need to be exposed to the risk of their choices. We saw the disasters that emerged from other realties in last big downturn, when people become isolated from responsibility they become irresponsible.   

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Law, Legislation and Civil Liberty – BAD LAW - DANGEROUS LAW - UNJUST PROCESS

THERE IS A LINK TO SPECIFIC CHALLENGES WITH THE BCMHA AT BOTTOM OF PAGE.
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It is the case that in the practice of law, that the minutia tends to take us away from justice, the big picture. In Canada, we have a circumstance in play that has the erosion of fundamental law occurring at an alarming rate. If you have a deep belief in common law and its fundamental tenets that are the foundation of our system, then you will share my concern with respect to this disturbing trend, a trend that has expediency trump due process. There are a number of examples of this trend throughout the system, no more glaring however than the BC Mental Health Act. An act that has drifted away from fundamental law, and that was drafted and is now administered is a manner that flouts common law traditions and the charter. We need to be very wary of the “tribunalisation” of legal process, as it has been applied here a number of ills have emerged; not the least of which is the stagnation of statute absent exposure to court process and alterations due to its administration in the face of precedent effect. We need to ensure that people have the benefit of the “full due process” that courts provide. We need to protect evidentiary process. We need to ensure that the standard of review is commensurate with state sanction. We need clarity in law. We need the absence of arbitrariness. As the BC Mental health act is written and administered there is a litany of breaches and infringements on expected process, fundamental law and the charter. The BC Mental Health Act, as it is administered, counts evidence in a manner that would be analogous to Crown Counsel writing “guilty” on a piece of paper, handing to the judge, and having it accepted. I have prepared a summary of a case of an individual severally affected by the mis-application of the BC Mental Health Act, please take the time to review this case by clicking on the link below. I am sure you will find this act and its administration as concerning as I do.  
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There has never been a better legal system than “common law”, it is fair, it is responsive and through the use of precedent a single “law” can evolve at a  measured pace. One can attribute common law’s fairness in large measure, I believe, to the fact that the people who devised the process knew they would never be subject to it. As common law is now applied, as directed by our charter, “universally”; we have certain protections and obligations. It is my assertion that the hard-earned protections afforded us, years of tradition that has built the foundation of our system – or the bank of fundamentals that make our common law jurisdiction’s residents’ safe from intrusion by others or government – are all being seriously challenged by a complex of factors; the apathy of the people to long accustom to legal fundamentals of freedom being in place, legislation greatly influenced by “special interests” that are in effect radicalized to the point of lobbing to weaken the fundamentals of freedom, technology in the hands of government and other actors that circumvent traditional legal and societal protocols. There has been an insidious slide backwards to state authority gaining greater and greater influence over the full continuum of human existence, we are all complicit in this, we need to be more diligent in arresting further state intrusion into the citizenry's private lives by ensuring the fundamentals of freedom; presumption of innocence, habitus corpus, protection against arbitrariness, overreaching legislation, charter protections, property rights etc. are upheld – the law must be administered off the foundation of first principles, as opposed to contemporary concerns and nouveau tangents.

A most glaring example of this is the British Columbia Mental Health Act. (BCMHA), where lobbing has effected a circumstance that has the interests of a few, very few, overriding the fundamental rights of the entire population. Through the experiences of a friend, I have witnessed a travesty of justice – where the most draconian measures available in Canadian society, incarceration was utilized inappropriately and on the judgment of what amounts to a single individual. This is a terrifying piece of legislation because it attacks the fundamental rights and freedoms of the entire population, and worse, discriminates against people at the mere accusation of mental infirmity (oft times accusations by laypeople) and then discriminates by the mechanics of the systems as it disempowers the accused to a greater extent the more they object. These types of legislations the world over have been the favoured tool of oppressors, as they both incarcerate and discredit in one fell swoop; Soviet Russia, China, jurisdictions in the United States and Europe have seen abuse of these types of statues, we need now to work to see that in Canada, that statutes of this nature are brought into accord with fundamental justice and the Charter of Rights and Freedoms.

In Canada, we are in a trend of lessening liberty as opposed to increasing liberty, I intend, with the BCMHA as a lens, to enlighten those who are interested in how our liberty is being eroded, how institutional inertia is taking the law further away from base principles and how easy it is for legislation to be misapplied and power abused. The BCMHA was conceived and promoted by people injured by what can be a ravaging experience, they have my empathy, however; in the creation and administration of the law a sober mind is required, and as much attention needs to be given to a law’s misuse as it’s intended use. The only way to ensure the law is properly directed is to build it on base principles which have at their core the protection of the individual against misapplied state power and or the actions of others.  It is a most grievous circumstance, that in Canada, we have legislation in place that both endangers the general populous, and both arrests the rights of the ill and discriminates against the ill.

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CMHC – Help New Entrants GOOD - Finance Speculation - STUPID

The CMHC’s present role, at its base, is to insure mortgages, as such, it is an excellent addition to the real estate lending complex. The concept of the government underwriting a mortgage to assist Canadians to purchase “a” home is an outstanding one. Many Canadians have the good fortune when they decide to purchase a home to simply pay outright, call on parents to cover the cost or to provide the down payment or in some way facilitate access to owning a home.

There are many Canadians, deserving Canadians, that toil in a marginal state – unable to buy a home because their monthly commitments preclude saving a down payment of 25% ( the typical amount for uninsured mortgages) – this is known as the “renter’s trap”. The CMHC’s ability to underwrite mortgages so that people can enter the housing market with only a 5% down payment is much needed in many cases.

If one believes property rights are the keystone of a market-based economy, as I do, then one must also believe that there is a right to accumulate property. If you’re interested in promoting capitalism, there needs to be access to capital or a means to extract capital from the deployment of self in the marketplace. The purchase of a home and its eventual complete ownership offer a mechanism for people to capitalize their efforts, and then to redeploy that capital beyond shelter to other ventures in society at large.

The difference in living standard between Canada and the western world, and the emerging second and third worlds is attributable, firstly, to simple and clearly defined property rights, and secondly, to the ability for the masses to access property and related capital benefits. In Canada the fruits of the beneficial effects of home ownership are prominent, aside from the direct benefit of industry activity, there is the secondary benefit of people being able to actuate more effectively in the market due to capital retention and accumulation.

What the CMHC should avoid doing is financing speculation. The residential housing market is a temptress for a government; its ability to generate “growth” or to stimulate the economy and its most immediate attachment to national industry tends to move government beyond the mere provider of housing opportunity for the unsupported housing entrant, to an institution seeking “spin-off” with blind abandon. The government then needs to be, the sober player in the market, as opposed to the accelerant. The government should the remain in the business of supporting the purchase of a single home, it should avoid underwriting mortgages on second, third … investment properties. The shoe box condo market looks pretty good when you can lever it up from 5%, the challenge is that when the market takes an upward thrust the ability to leaver brings people into the market at a high velocity and bubbles not only form and burst, but they form big.  

At the core of most financial downturns or economic calamities, one often finds a real estate bubble to blame. The “mob mentality” to "get in now while it is going up" generates a circumstance where there are carpenters building houses for carpenters – the quintessential building boom. The key determinants in the residential real estate market, employment and credit cost and availability, need to inform the market on as tight of a feedback loop as possible, the largest disasters – the last financial crisis in large part – are often a product of government involvement in the housing market. Fanny May and Freddy Mac in the United States, in many ways, underwrote the most irresponsible lending binge in history; we need to be wiser in Canada.

Agricultural Land Commission - Largest land expropriation in Canadian history

ALR - Largest land expropriation in Canadian history

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The incursion by government in to the domain of private property, and its use and administration challenges one who holds private property rights dear. In Canada, and specifically in British Columbia where in 1972 the then NDP government in effect expropriated agricultural land in British Columbia for “preservation” as a perceived public good. Perhaps the best example of the lack of consideration in Canada for private property rights is their absence in the Charter of Rights and freedoms, Canadian’s are essentially absent any constitutional protection of private property – we do have a large breath of common law to support property rights; but our ownership or management choice of property can be legislated away, as was demonstrated by the advent of the Agricultural Land Commission (ALC). Had property rights been in place, as a right held by Canadians, the government would have had to properly compensate landowners for the reduction in opportunity that accrued to the owners as a result of the ALC’s creation. Farmers were never properly compensated, the legislation has never served to stave off development of choice farmland, agricultural land holds a massive “speculative development premium”, agricultural land trades at values that far exceed economically viable operations and the other goals of the legislation have only partly been satisfied.

The ALC’s actions, having failed to some degree to effect an overall benefit to agriculture, still frustrates the supply of land of only “marginal” value as farm land, in retarding the supply of said lands, the ACL has put significant upward pressure on land development for housing, this situation is acute in the lower mainland. This reality is exacerbated by the fact the most of BC is crownland and the government seems intent on hording it, rather than releasing in a responsible way to effect a more livable circumstance for the lower and middle income strata.

There are circumstances where the government is warranted in offering direction for private land use, but parameters must be set, people need to be reimbursed. Perhaps key agricultural land is such a case. Please read below, a letter sent in 2006 to the Agriculture Minister. Most of my critique offered then is still valid – action is needed.      

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Neil E. Thomson

 nthomson2@yahoo.ca

September 22, 2006

Honourable 

Minister of Agriculture and Lands

PO Box 9043

Stn Prov. Govt.

Victoria BC

V8W 9E2

Dear Sir,

RE: The Agricultural Land Commission Reform

This letter is in response to your and other’s discourse on the Bill Good show and the Forever Farmland submission paper authored by Charles Campbell for the David Suzuki Foundation.

Property Rights

Recent discourse around this issue is lacking advocacy for land owner’s interests. On the Bill Good show you stated that, upon a properties exclusion from ALR the owners become “instant millionaires.” The presumption being that the owner in enjoying a windfall through a zoning change being bestowed on them by the government. The fact is that farmland owners are being impaired from exercising their right to manage personal property in the most profitable way. Your tone seemed to support the tone of the David Suzuki Foundation’s submission paper that opportunity is being extended to land owners upon exclusion from the ALR, when in fact opportunity is being regained, or that ownership is being allowed to do what property rights should allow them to do. 

The right to manage property by ownership in response to market opportunity is the keystone of a market based society. Proper deference to this paradigm was withheld when this legislation initially was imposed on the farmland owners of British Columbia, and has continued to be ignored over the ALR’s thirty plus year history.

One needs to recognize that market influences often impose Faustian actions that run contrary to the greater good, and perhaps agricultural land use and development is such a case. While the need to preserve farmland is certainly a value I share with many, the actual need to preserve farm land is very abstract and subjective. It is difficult to provide supported argument for preservation of farmland outside what may have “naturally” occurred in response to market forces.

In a case such as the ALR, especially where a compelling state interest is very difficult to demonstrate, property rights should be respected by reimbursing ownership for opportunities forgone. When the government put this legislation into place in 1972 they erased large portions of people’s net worth with what amounted to an act of expropriation.  

Had the government given deference to property rights when this legislation was put in place, many of the negative effects of the ALR would have been reduced. The proper treatment of farmland owners of the day would have given the government the latitude to strengthen lands retention by the ALC and may have greatly reduced the speculative values on farmland today.

ALR and Valuation of Farmland

The present application of the ALR legislation has set up a dynamic where speculation is still viable, so land prices escalate in response to their potential value for development, while at the same time the ALR is restricting supply of land for development. The past application of the ALR legislation may have driven farmland prices higher than if the ALR legislation was absent.

The only way to assure that Farmland prices reflect farming’s ability to be viable is to have lands inclusion in the ALR permanent and the contemplation of development non existent. As a society we ascribe values to land for any number of reasons, we protect parks etc.. We manage parks in the absence of consideration of the removal of Park status and we can do the same for agricultural land.

Permanent Inclusion in the ALR

Permanent inclusion in the ALR requires recognition that government is expropriating opportunity from farmland owners and retribution needs to be made to present ownership for opportunities forgone. The commitment to permanence with proper deference to property rights, would force government to be thorough in their assessment of land type and quantity to be included in the ALR.

Clearly Defined Purpose, Criteria for Inclusion and Inventory

There needs to be a clearly defined purpose for inclusion and a set of criteria for inclusion that supports that purpose. Preserving farmland is a very broad or vague mandate and a confused execution has emerged as a result of the existing vagueness. What is the farmland being preserved for? How much preserved farmland is enough? What quality requires preservation? What are the complete set of values we are seeking to protect?

Inclusion in the ALR should be criteria driven. The establishment of clear criteria for inclusion provides for a less politically charged environment and provides the “market” with a stable setting for planning and development.

Presently there is a trading process which allows agricultural land outside the ALR to be “traded “ to allow the development of land inside the ALR. This fact in of itself illustrates that there is more work to be done on inventory or presumably these “non ALR agricultural lands” would have been included in the ALR at the inception of the ALC. A complete inventory of presently available agricultural land needs to be developed.

The interests underpinning the societal desire to preserve farmland are diverse. A process needs to be initiated that draws out the values that exist in the public body around farmland and informs them of the cost of preserving farmland. It is my opinion that a broad array of values are at play exceeding just securing food production, to values including aesthetics of the countryside and preservation of the family farm. The existing legislation and its enactment seem to be falling short on responding to the diversity of values that exist.

Regressive Assessment of ALR Legislation

The legislation needs to be considered in the context of where would we be today in the absence of the ALR? What do other jurisdictions look like without a ALR? This assessment would provide valuable information for the future management of the ALR and its management regime.

Facilitation of Diverse Land Use

  

The government has taken steps in the past to contribute to the viability of agriculture by offering opportunities for diversifying farm operations. The woodlot program is a case in point. The farming community should have access to tourism opportunities enhanced. Complementary Tourism enterprises come with a small environment and land use footprint, and offer opportunity for higher margins than can be garnered from most agricultural enterprises.

The case of Golf courses has been raised by many as a “non agricultural” activity and inappropriate for ALR Lands. This is a case in point, where the legislation needs to offer direction. A Golf course is an activity that allows for economically viable non-destructive use of the land, until such time as a future agricultural venture offers a better opportunity. That is to say the land is “readily” reclaimable or “held in reserve” for agriculture. A golf course is every bit as agricultural as a turf farm or a Christmas tree farm.

Forever Farmland – David Suzuki foundation - Recommendations

The recommendations submitted to you are generally acceptable. The recommendations do need to be sensitised to property rights. In the ambit of land use management, the various planning forums need to find interoperability. Criteria and objectives can be derived from public consultation through the full management spectrum, the application of criteria and objectives should be held to the local forums.  

Conclusion

I am compelled to support measures that protect farmland. The protection of farmland satisfies two primary concerns for me; firstly the assurance of the ability to be regionally self-sufficient in traditional food production, and secondly the desire to preserve the beauty of British Columbia’s countryside.

Thank you for giving consideration to the contents of this letter in your deliberations.

Sincerely,

Neil E. Thomson

CC:      Claude Richmond, Minister of Employment and Income Assistance

            Kevin Krueger, MLA Kamloops – North Thompson 

            Ann Rowan, Director of Sustainability – David Suzuki Foundation