The Financing of Residential Construction in Newfoundland

Elected governments in Canada have long stated that access to safe and decent housing is a basic right of Canadians. With the first housing legislation, the Dominion Housing Act of 1935, housing policy attempted to encourage the development of mortgage financing for residential construction. Successive versions of the National Housing Act (NHA) have given to government the powers to (a) initiate mortgage loans or (b) support the activities of other lenders approved under the terms of the Act. The main approved lenders are banks, life insurance companies and trust companies. The purpose of this note is to show that national housing policy has not been particularly effective in Newfoundland because of its reliance on these NHA-approved lenders. Financial instiutions do not operate effectively in Newfoundland in the area of house construction and thus the improvement in housing has had to be provided by other means. Over a third of new single-family dwellings (SFDs)in Canada are financed through channels not directly supported by national housing policy. For the years 1973-8, for instance, new SFDs financed outside government and approved sources range from 12.5 per cent of all SFDs in Nova Scotia to 63.8 per cent of all SFDs in Newfoundland.' Surprisingly, this aspect of SFD financing has not been studied by government or academic investigators, even though the number of dwellings financed by these 'other' sources exceeds the number financed by government sources in every province. In all provinces except Alberta, Manitoba, Ontario, and Nova Scotia, the number of SFDs financed by 'other' sources approximates or exceeds the number financed by the NHA and conventional mortgages of the approved lenders. In Atlantic Canada, SFD construction has a particularly strong influence on the provincial economies. For example, the 1973-1978 Canadian average of the value of new SFD construction as a percentage of Gross National Expenditure was 2.7 per cent, but in Newfoundland and Prince Edward Island, the proportion of Gross Provincial Expenditure attributable to new SFD construction financed by 'other' sources alone was 4.1 and 3.6 per cent respectively.2 Thus concern for the effectiveness of housing policy should be a very important