On April 7, 2022, Canada's Minister of Finance Chrystia Freeland revealed the 2022 Federal Budget. Recognizing that Canada has a significant housing shortage, the Budget has a large emphasis on reconciling the supply and affordability of housing in Canada.
Budget 2022 includes billions of dollars in new spending to put toward housing affordability over the coming five years. This comes at a critical time for many Canadians who have been priced out of real estate markets due to skyrocketing price tags amid lower interest rates.
“We will invest in building more homes and in bringing down the barriers that keep them from being built. We will invest in the rental housing that so many count on. We will make it easier for our young people to get those first keys of their own,” Freeland said. “In putting together this budget, we were very mindful of elevated inflationary pressure,” noting this is one that “focuses on expanding the supply side of the economy.”
Included in the 2022 Budget are the following real estate related measures:
Two-Year Ban on Foreign Homebuyers. The Budget contemplates new rules to prohibit foreign commercial enterprises and individuals who are not Canadian citizens or permanent residents from acquiring residential property in Canada for two years. Notably, refugees, foreign workers, and international students on the path to permanent residency are expected to be exempt.
First Time Homebuyers Incentives. The Budget introduces a Tax-Free First Home Savings Account that will allow first-time homebuyers to contribute up to a maximum of $40,000. Contributions to this account would be tax-deductible like an RRSP, while withdrawals to buy a home would be non-taxable like a TFSA. In addition, the Budget doubles the existing First-Time Home Buyers’ Tax Credit (from $5,000 to $10,000).
CMHC and Co-Operative Housing Funding. The Budget provides $4 billion over five years to the Canada Mortgage and Housing Corporation (“CMHC”) to establish a new Housing Accelerator Fund. The purpose of this Fund is to speed up the planning and delivery of housing in municipalities and aims to create 100,000 new housing units over the next five years. In addition, the Budget provides $1.5 billion over two years to expand CMHC’s existing Rapid Housing Initiative, which is expected to allow the construction of at least 6,000 new affordable housing units. Lastly, the Budget provides for an additional $1 billion in loans to support co-operative housing projects.
Anti-Flipping. The Budget contemplates new rules requiring any person who sells residential property they have held for less than 12 months to be subject to full taxation on their profits (i.e. as business income). This will apply to residential properties sold on or after January 1, 2023. Notably, exemptions would apply for Canadians who sell their home due to certain life circumstances e.g. death, disability, the birth of a child, a new job, or a divorce.
If you have any questions as to how these measures can help you sell or purchase a home, please don’t hesitate to contact me.