Last week, Finance Minister Bill Morneau unveiled the Liberal government’s final budget. The main focus was primarily on housing affordability and supply as multiple measures targeted first-time homeowners:
Source: Canadian Home Builders’ Association
FIRST TIME HOMEBUYER INCENTIVE: Starting in 2019/2020, the incentive will provide up to $1.25 billion (over three years) to approximately 100,000 eligible first-time homebuyers with household income under $120.000/ year. The incentive will cut the monthly mortgage payments by offering 5% (for an existing home) or 10% (for a newly constructed home) shared equity mortgage from the Canadian Mortgage and Housing Corporation. This means that for a $400.000 mortgage the monthly payments will drop by more than $225. Eventually the home owners will have to pay back the incentive at resale; however, there hasn’t been any information on how that would work.
HOME BUYERS PLAN: The government is increasing the amount first-time homebuyers can borrow from their Registered Retirement Savings Plan (RRSP) from $25,000 to $35,000. This measure permits two first-time buyers in the same household to combine withdrawals for up to a $70,000 down payment. As of 2020, this program will also be eligible for those who split from their spouse or common-law partner, even if they are not first-time buyers.
STRESS TEST: Although there haven’t been any actual changes on the stress test, after recommendations by the Canadian Home Builders’ Association the government will continue to monitor the stress test and consider adjustments to support access to housing while safeguarding financial stability.
HOUSING SUPPLY CHALLENGE: The federal government launched a $300M housing supply challenge, inviting municipalities and other groups to propose initiatives that speed up affordable housing construction. The Home Builders’ Associations have been calling for collaboration between municipalities and other stakeholders – especially builders and developers. This “Challenge” addresses housing supply issues and is a step towards innovation leading to increased supply.
SKILLED TRADES: With this measure, the government is hoping to help both young Canadians enter the job market and older workers upgrade their skills. The budget will provide $6M over two years to create a national campaign to promote skilled trades as a first-choice career for young professionals. In addition, starting in 2020/ 21 the government will provide $40M over four years and then an additional $10M ongoing to support Skills Canada. The government is also offering skilled trades a refundable tax credit of $250 – $5,000/ year over their career, that can be used for training and college/ university funds. Lastly, the budget is offering an EI Training support benefit that allows employees to take up to 4 weeks of secured paid leave, over 4 years.
RENTAL CONSTRUCTION FINANCING INITIATIVE: The government aims to boost rental supply by providing $10 billion over nine years in additional funding, for the federal government’s Rental Construction Financing Initiative, extending the program until 2027/ 28. This increase will support 42,500 new units across Canada, particularly in areas of low rental supply.
EXPERT PANEL: The budget announced the creation of a newly established Expert Panel on the Future of Housing Supply and Affordability. The government will commit $4M over two years to support the work of the Panel that will be led by the Minister of Finance of Canada and British Columbia. There will also be an investment of $5M (over two years) for the Canadian Mortgage and Housing Corporation to work on state-of-the-art supply modeling and related data collection.
The government also announced that it would introduce legislation that will require the Government to a maintain a National Housing Strategy that prioritizes the needs of the most vulnerable. On the sustainability front, the Sustainable Affordable Housing Innovation will provide financing and support to affordable housing developments to improve energy efficiency in both new and existing housing. The Community Eco-Efficiency Acceleration will also provide financing for municipal initiatives to support home energy efficiency retrofits. Lastly, the government will invest in infrastructure by transferring $2.2B directly to municipalities through the Gas Tax Fund in 2018/ 2019.
Over the past few months the Home Builders’ Associations – on national, provincial and local levels – have been successfully advocating and pushing for more measures on housing affordability and supply, and we will continue to push for more action. As HHHBA CEO Suzanne Mammel states: “All levels of government have a role to play in housing affordability for Canadians. We appreciate the steps recently taken by the Federal Government to help in this regard, however these efforts will not help everyone. We will continue to push for changes to the stress test which we believe will have greater impact on new home buyers’ ability to get into the housing market.”
Home ownership has indeed been the highlight of the government’s 2019 budget; a statement in a media release from the Prime Minister’s Office the day after the budget shows that this is just the beginning:
“Many young Canadians dream of owning their first home. With rising house prices, and not enough homes to meet demand, it is getting harder and harder to make that dream a reality. That is why the Government of Canada is taking important steps to make housing more accessible and affordable in Canada, especially for first-time homebuyers.”