As one of the most significant policies in Budget 2019, Prime Minister Justin Trudeau’s federal government has announced a major new housing program that aims to make housing ownership more affordable for first-time buyers.
The First-Time Home Buyer Incentive (FTHBI) will allow home buyers to reduce the amount of money they need for an insured mortgage.
Through Canada Mortgage and Housing Corporation, the federal government will provide up to $1.25 billion over three years, beginning in the 2019-20 fiscal year, to eligible first-time homebuyers by sharing the cost of a mortgage.
Those eligible would be first-time home buyers with household incomes under $120,000 annually. Additionally, the participants’ insured mortgage and FTHBI amount cannot be more than four times the participants’ annual household incomes.
“Since no ongoing payments would be required with the Incentive, Canadian families would have lower monthly mortgage payments,” reads the plan. “As a means-tested program, the Incentive would target Canadians that face legitimate challenges entering housing markets.”
For example, in the scenario where a borrower purchases a new $400,000 home with a 5% down payment and a 10% CMHC shared equity mortgage (worth $40,000), the borrower’s total mortgage would be reduced from $380,0000 to $340,000. This would reduce the borrower’s monthly mortgage costs by as much as $228 per month.
Such a shared equity mortgage model replicates similar programs offered by non-profits and other providers in some regions of the country.
Additionally, the federal government plans to increase the Home Buyers’ Plan withdrawal limit by $10,000 from $25,000 to $35,000, effectively providing first-time home buyers with increased access to their RRSP savings to buy a home.
Other major housing-related announcements deal with funding for the construction of more affordable housing, specifically an additional $10 billion in financing over nine years through 2028 to help build 42,500 new affordable units across the country, specifically in areas with a low rental supply.
To address concerns over improper tax compliance in the real estate sector, the federal government will provide Canada Revenue Agency with $50 million over five years to create new real estate audit teams in high-risk regions — particularly in BC and Ontario. These teams will monitor capital gains from real estate sales, income made on real estate flipping, commissions earned are reported as taxable income, and GST and HST.
Data monitoring of real estate purchases will also be improved by providing Statistics Canada with $1 million over two years to conduct a federal data needs assessment, with the initial results used to inform the work of the British Columbia-Canada Working Group on Real Estate. Work with other jurisdictions will follow.
“The assessment would seek to facilitate further streamlining of data sharing between federal and provincial governments to inform enforcement efforts on tax compliance and anti-money laundering,” continued the plan.