A quick summary - how the 2022 Federal Budget proposes to tackle housing affordability
The average price of a home in the GTA (and most of Canada) has more than doubled in the last ten years causing home ownership to become out of reach for many Canadians. The 2022 federal budget unveiled last week proposes many changes that are, in theory, supposed to help moderate future price increases in the Canadian housing market. Here are the highlights:
A new tax-free home savings account with a total cap of $40,000 and annual contributions up to $8,000 that are tax-deductible (and withdrawals are tax-free).
$4 billion to help municipalities speed up construction of 100,000 new homes in the next five years.
$1.5 billion to build 6,000 affordable housing units to combat homelessness.
Home renovation tax credit; if you are building a secondary suite for a family member you can claim up to 15% of a maximum of $50,000 towards renovation and building costs.
Doubling of the first-time home buyer’s tax credit (basically you can now receive a tax rebate of $1500 vs. $750).
A promise to make the currently under-used “First time home buyer incentive” program more enticing.
The sale of a principal residence would now be subject to tax, if you sell within the first 12 months of owning it (this is to discourage house-flipping).
A 2-year buying ban on foreign individuals and entities, subject to certain exceptions.
Sales taxes on assignment sales. To discourage speculation in the pre-construction market.
Proposal to move forward with a “home buyer’s bill of rights” that would include a ban on blind bidding and the right to a home inspection (even in a bidding war when you don’t include a condition on home inspection).
My take on all of this? I think there are many worthy initiatives here - policy that rewards those who save, removes red tape to speed up supply* and penalizes those who use the market as a speculative “quick money” tool are all good in my book.
Ultimately, the biggest drivers contributing to housing affordability are historically low interest rates, strong demand from all corners of the market (with buyers of investment properties being one of the most influential forces), and supply that can’t keep up with all of this demand. Will the measures above prove to have enough teeth to slow demand and boost supply? Personally I doubt that this particular set of measures are enough to have any dramatic impact on the market, but most of these initiatives are better than doing nothing at all. There are some good steps in the right direction here that will help create a more fair playing field.
*It remains to be seen how this plays out, and if we will continue to embrace development solutions that demand more densification, protection of critical ecosystems, and building efficiency while reducing costs and removing barriers to speed and creativity.
-Steve
