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On April 7, 2022, Finance Minister Chrystia Freeland released the 2022 Federal Budget – “A Plan To Grow Our Economy & Make Life More Affordable”.  Contained within the document are several measures aimed at making housing more affordable and available for Canadians.  While many of the specific policy details have yet to emerge, what follows are some of the key housing related budget items that could impact those hoping to buy (or sell) a home.

What key housing initiatives are being introduced in Budget 2022?

FIRST-TIME HOMEBUYER RELIEF

  • Introducing the Tax-Free First Home Savings Account, a vehicle for first-time homebuyers to save up to $40,000. Similar to an RRSP, contributions would be tax-deductible. Similar to a TFSA, withdrawals to purchase a first home would be non-taxable (any capital gains within the account would also be non-taxable).  Target timeline: Accounts can be opened in 2023.
  • The First-Time Home Buyers’ Tax Credit amount will be doubled to $10,000, providing up to $1,500 in direct support to homebuyers. Target timeline: Applies to homes purchased on or after Jan. 1, 2022.
  • The First-Time Home Buyer Incentive (FTHBI) Program will be extended to March 31, 2025. This allows eligible first-time buyers to lower borrowing costs by sharing the cost of buying a home with the government.  For more information about the FTHBI program please visit the government website at the following link or contact an Outline Financial mortgage agent to discuss Program details and qualification.

REDUCING COMPETITION TO FREE UP HOUSING SUPPLY

  • A two-year Ban on Foreign Investment in Canadian Housing to prevent foreign commercial enterprises and foreign buyers from purchasing non-recreational residential properties in Canada—providing Canadians with a better chance of acquiring these properties. It is unclear when this ban would take effect.
  • New Rules for Property Flipping will tax the profits that come from “flipping” a property. Anyone who sells a property within 12 months of buying it would be subject to full taxation of their profits as business income. Exemptions will apply to Canadians facing certain life changes, such as divorce, for example. This is meant to discourage flipping which the Government says unfairly drives prices upward, as well as ensuring the principal residence exemption is limited to Canadians that use their houses as homes. Target timeline: Applies to residential properties sold on or after Jan. 1, 2023.

POSSIBLE CHANGES TO THE HOMEBUYING PROCESS

  • Changes could be on the horizon for the homebuying process. The government is engaging with provinces and territories to develop a Home Buyers’ Bill of Rights.  While the Bill will focus on a wide range of topics, two items that are front and center is a potential ban on blind bidding, providing a buyer with the legal right to a home inspection, and transparency on the history of sale prices during title searches.  There is no timing provided for any of these initiatives, however, in related news, CREA (Canadian Real Estate Associated) announced a pilot project on April 6 that will display real-time tracking of real estate offers for listings on REALTOR.ca.

GOVERNMENT MEASURES TO INCREASE HOUSING SUPPLY

The federal government is proposing a series of measures to double Canada’s rate of home construction over the next 10 years. Some of these measures include:

  • Launching a new Housing Accelerator Fund to incentivize cities and towns to build more housing. Carrots could include 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. Target: 100,000 net new housing units over the next five years.
  • Extending the Rapid Housing Initiative with additional funding to create at least 6,000 new affordable housing units, with at least 25 per cent of funding going towards women-focused housing. Target timeline: Two years, starting in 2022/23.
  • Introducing a Multigenerational Home Renovation Tax Credit, providing up to $7,500 toward the construction of a secondary suite for a senior or a disabled adult. Target timeline: Starting in 2023.

WHAT’S NEXT?

Over the medium and long term, it is expected that housing demand will continue to increase.  Canada welcomed more than 405,000 new permanent residents in 2021, the largest annual influx in history. Looking ahead, the annual target increases to 451,000 permanent residents by 2024. As the country’s economy and population continue to grow, one thing is certain: Families will be searching for homes.

Housing supply and affordability is clearly on the federal government’s radar.  Federal Budget 2022 builds on the housing related initiatives launched in previous budgets and provides a number of measures to try and address affordability and supply.  Only time will tell if these measures are sufficient.

This analysis on Budget 2022 is preliminary and pending further examination as more details emerge.

To discuss how these policies could impact your specific purchasing power, please reach out to an Outline Financial mortgage agent at hello@outline.ca or 416-536-9559 as we are always on standby to help.

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