Thursday’s federal budget outlined measures to address housing affordability, although it’s unlikely to assist first-time homebuyers, especially given the current market conditions.
A research study performed by experts at Dejardins noted, “All in all, while we believe these measures will help to provide some relief in the housing market, they will be challenged to meet the need for increased supply that plagued the Canadian real estate sector even prior to the pandemic,.”
Overall, the federal government will provide over $10 billion in new housing-related costs spread over five years. The funding will support efforts to increase real estate supply, help first-time purchasers enter the market, and safeguard both purchasers and renters while limiting foreign financial investment.
The budget highlights various Liberal Party promises made throughout the last election, though its guarantee to increase the insured mortgage cut-off from $1 million to $1.25 million did not go unnoticed.
Here are some of those efforts.
New Housing Accelerator Fund
- The fund would provide $4 billion for new housing. CMHC will launch this program in 2022-2023 to build 100,000 units over the next five years.
- “The fund will be designed to be flexible to the needs and realities of cities and communities, and could include support such as an annual per-door incentive for municipalities, or up- front funding for investments in municipal housing planning and delivery processes that will speed up housing development,.”
Doubling the First-Time Home Buyers’ Tax Credit
- The new tax credits amount to $10,000, which would provide up to a $1,500 benefit to home buyers.
- “This measure would apply to homes purchased on or after January 1, 2022.”
Tax-Free First Home Savings Account
- This new account would “give prospective first-time home buyers the ability to save up to $40,000. Like an RRSP, contributions would be tax-deductible, and withdrawals to purchase a first home—including investment income— would be non-taxable, like a TFSA. Tax-free in, tax-free out.”
An Extended and More Flexible First-Time Home Buyer Incentive
- The federal government will extend the First-Time Home Buyer Incentive (FTHBI) program to March 31, 2025, from its initial expiration of September.
- Those in the industry have criticized the three-year shared-equity program administered by (CMHC). Recent figures reveal that the federal government has only issued $270 million of the $1.25 billion set aside for the program since December. The federal government commented that it’s exploring “more flexible and responsive” options for newbie purchasers.
Ban on Foreign Investment in Canadian Housing –
- Where the federal government has proposed to implement
- “restrictions that would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non- recreational, residential property in Canada for a period of two years.”
Making Property Flippers Pay Tax
- This measure would “introduce new rules to ensure profits from flipping properties are taxed fully and fairly. Specifically, any person who sells a property they have held for less than 12 months would be considered to be flipping properties and would be subject to full taxation on their profits as business income. Exemptions would apply for Canadians who sell their home due to certain life circumstances, such as a death, disability, the birth of a child, a new job, or a divorce.”
Taxing Assignment Sales
- This “proposes to make all assignment sales of newly constructed or substantially renovated residential housing taxable for GST/HST purposes, effective May 7, 2022.”
Moving Forward on a Home Buyers’ Bill of Rights
- This would “provide $5 million over two years, starting in 2022-23, to the Canada Mortgage and Housing Corporation” … “to engage with provinces and territories over the next year to develop and implement a Home Buyers’ Bill of Rights and bring forward a national plan to end blind bidding. Among other things, the Home Buyers Bill of Rights could also include ensuring a legal right to a home inspection and ensuring transparency on the history of sales prices on title searches.”
Multigenerational Home Renovation Tax Credit
- This would “introduce a Multigenerational Home Renovation Tax Credit, which would provide up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability. … Starting in 2023, this refundable credit would allow families to claim 15 per cent of up to $50,000 in eligible renovation and construction costs incurred in order to construct a secondary suite.”
Article feature image: David Kawai/Bloomberg via Getty Images