Canada’s 2022 Housing Budget Initiatives

Today, the government of Canada announced a $10 billion package of proposals that are intended to reduce the cost of housing in Canada. The goal of these initiatives is to tackle the insufficient housing supply in order to satisfy the demands of the rapidly growing number of buyers. Because of the government’s policy of rapid immigration in 2015, the development of new households has increased at a much faster pace than the completion of houses for both renters and purchasers. Due to such excess demands, the housing prices have far exceeded the reach of the average Canadian.

Although the measures that were announced in the 2022 housing budget initiatives are welcomed by investors and citizens, analysts posit that these measures are underwhelming. The Feds can control the construction of lower-cost housing through CMHC, however, the majority of the home building is under the patronage of municipal governments, where red tape, zoning restrictions and delays abound.

An important aspect to highlight regarding the housing budget initiative is that the government has implemented a two-year ban on foreign residential property purchases. But, in accordance with Phil Sopher, chief executive of Royal LePage, “It will have a negligible impact on home prices. We know from the pandemic period, when home prices escalated with virtually no foreign money, that our problem is made-in-Canada.”.

Following is a list of Canada’s 2022 housing budget initiatives.

Tax-Free Home Savings Account

• Introduction of the Tax-Free First Home Savings Account which would provide prospective homebuyers the ability to save up to $40,000. Similar to an RRSP, the contributions made would be tax deductible, and withdrawals for the purchase of a first home – including investment income – would be non-taxable, like a TFSA.

New Housing Accelerator Fund

• Over the course of five years, the government has targeted to create 100,000 new housing units and has proposed to provide $4 billion over five years. Because of this initiative the government has launched a new Housing Accelerator Fund which is flexible to the requirements and realities of cities and communities, while providing the support such as an annual per-door incentive or up-front funding for investments.

New Affordable Housing

• Budget 2022 has proposed the providence of $1.5 billion over the course of two-years to ensure that more affordable housing can be built quickly. Moreover, the government is also extending the Rapid Housing Initiative because this new funding is expected to create at minimum 6,000 new affordable housing units.

An Extended and More Flexible First-Time Home Buyer Incentive

• The First-Time Home Buyer Program has been extended by the government and have also made it more flexible for Canadians in order to ensure that more people are eligible for this program. The borrowing costs has been lowered through sharing of cost for buyers who are purchasing a house for the first time.

A Ban on Foreign Investment in Canadian Housing

• The government has proposed restriction which would inhibit investments from individuals who are not citizens of Canada or are not permanent residents and foreign commercial enterprises have been prohibited as well from acquiring non-recreational, residential property in Canada for two-year period.

Property Flippers Pay Their Fair Share

• The government is also introducing new rules and regulations for people are selling their property if they have held for less than 12 months. These rules will subject them to full taxation on their profits as business income. These rules will be implemented for properties that are being sold on or after January 1, 2023. However, exemptions will also be applied to those Canadians who are selling homes because of life circumstances such as death, disability, the birth of a child, a new job, or a divorce.