How The New Budget Could Affect Your Housing Aspirations
Housing is a significant theme in the 2022 Federal Budget Announcement that the government of Canada recently released. The budget announcement included a $10 billion package of proposals intended to reduce housing costs in Canada. However, there is insufficient supply to meet the demands of a rapidly growing population base. Therefore, the measures announced to increase housing construction are good, but a little underwhelming.
While the Feds can control the construction of lower-cost housing through CMHC, most home buildings are under the influence of municipal governments’ where red-tapism, zoning restrictions, and delays abound.
The headline policy announcement was for a two-year ban on foreign residential property purchases. It may sound like a smart and reasonable move, but some argue it will have a negligible impact on home prices. Remember that home prices soared throughout the pandemic with virtually no foreign money, so the problem may be Canada-made.
Here are the highlights of the Federal Budget measures to improve housing affordability:
Tax-Free Home Savings Account: Introduction of the Tax-Free First Home Savings Account to allow prospective first-time homebuyers 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
New Housing Accelerator Fund: With the target of creating 100,000 new housing units over five years, it proposes to provide $4 billion during this period. Starting in 2022-23, a new Housing Accelerator Fund will be launched that is flexible to meet the needs and realities of cities and communities. It will also support an annual per-door incentive or up-front funding for investments in municipal housing planning and delivery processes to speed up housing development.
New Affordable Housing: To ensure that more affordable housing can get built quickly, Budget 2022 proposes to provide $1.5 billion over two years, to extend the Rapid Housing Initiative. This new funding which starts in 2022-23 is expected to create at least 6,000 new affordable housing units, with at least 25% of the budget earmarked for women-focused housing projects.
An extended and more flexible First Time Home Buyer Incentive: Extension of the First-Time Home Buyer Incentive allows eligible first-time homebuyers to lower their borrowing costs by sharing the cost of buying a home with the government till March 31, 2025. It makes the program more flexible and responsive to the needs of first-time homebuyers, including single-led households.
Ban on Foreign Investment in Canadian Housing: The proposed restrictions prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada for two years.
Property Flippers to Pay their Fair Share: This new rule will make any person who sells a property they’ve held for less than twelve months subject to full taxation on their profits. It would be considered business income, applying to residential properties sold on or after January 1, 2023. Exemptions would apply to 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.
Rent-To-Own Projects: Providing $200 million in dedicated support under the existing Affordable Housing Innovation Fund. It will include $100 million to support non-profits, co-ops, developers, and rent-to-own companies building new rent-to-own units.
Home Buyer’s Bill of Rights: It brings forward a national plan to end blind bidding. The Home Buyers’ Bill of Rights could also insert a clause to provide a legal right to a home inspection and ensure transparency on the history of sales prices on title searches.
Multi-Generational Home Renovation Tax Credit: Providing up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability, starting in 2023.
Doubling the First-Time Home Buyers’ Tax Credit: Doubling the First-Time Home Buyers’ Tax Credit amount to $10,000, and providing up to $1,500 in direct support to home buyers. It will apply to homes purchased on or after January 1, 2022.
Co-Operative Housing Development: Reallocating funding of $500 million to a new Co-Operative Housing Development Program to expand co-op housing in Canada. Also, providing an additional $1 billion in loans to be reallocated from the Rental Construction Financing Initiative to support co-op housing projects.
First Thoughts
Nothing the government has announced within this budget will make a substantial difference in the housing market. In fact, the spike in interest rates that we’re currently experiencing will make more of an impact.
I had hoped the budget would include things like:
- Raising the cap of $1 million on insurable mortgages.
- Re-instating 30-year amortization for first-time home buyers.
- Allowing a “cooling-off” period after a bid has been accepted. It would give potential home buyers more time to secure financing. (Maybe next time!)
If you’re planning to purchase a home soon and want to learn the best way to move forward in the current scenario, get in touch with Mortgages by Erin. As a mortgage broker in Toronto, ON, with over ten years of experience, I will help you secure a mortgage with the best rate and terms to suit your financial situation.
I offer pre-approvals, home purchase mortgages, 2nd mortgages, refinancing, purchase/ refinance plus improvement mortgages, home equity lines of credit, and mortgage renewals/transfers. I also assist with self-employed mortgages, credit counseling for bruised credit, alternate and private mortgage lending, and spousal buyout mortgages.
I serve clients across North York, Scarborough, Etobicoke, Toronto, Mississauga, Markham, Vaughan, and Richmond Hill, ON.
If you have any questions about mortgages, please contact me by clicking here. To learn more about the other services I offer, please click here.