Canadian Federal Budget Housing Affordability Updates

Federal Budget highlights: 5 steps towards making Canada's housing market more affordable

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Canada's ultra-hot real estate market has left many would-be homeowners wondering: is buying a house even possible? 

For a lot of us, it hasn't been. But the 2022 Federal Budget, released last month, outlines several steps the government is planning to take to make home ownership more affordable for all Canadians. 

The key pillars of the plan include: 

  • Providing more tools for young Canadians to enter the market
  • Encouraging builders to pick up the pace of construction and create more homes for interested buyers
  • Limiting foreign investment

Let's take a look at 5 key ways the recent budget attempts to make homeownership—particularly for first-time buyers—more accessible.

#1: Investing in housing affordability

The investments outlined in the federal budget will put Canada on track to double new home construction over the next decade.

Two of those funding initiatives are the $4 billion Housing Accelerator Fund and the $1.5 billion Rapid Housing Initiative (RHI). Both are designed to directly support various cities across the country by encouraging development that meets the needs of their communities. 

What does this mean in terms of output? The Rapid Housing Initiative in particular is expected to create at least 6,000 new affordable housing units over the next two years. 

Plus, to make this incoming inventory even more accessible and affordable, financial aid for first-time homebuyers could be on the way, too. 

A new Tax-Free First Home Savings Account is proposed to help Canadians save up to $40,000 for a down payment on their first place. 

The budget also outlines changes to existing tax credits and incentives to help young Canadians keep up with market rates (including doubling of the First Time Home Buyers’ Tax Credit). 

#2: Protecting buyers with a Home Buyers’ Bill of Rights 

The goal of the Bill of Rights is to tackle key factors that the Federal Government—and, in particular, Housing Minister Ahmed Hussen—has determined to be the biggest barriers to housing affordability in Canada by: 

  • Banning blind bidding and making historical home sale prices public
  • Making home inspections a legal right for all buyers before purchase
  • Ensuring real estate professionals, including agents and mortgage brokers, are acting with their clients' best interests in mind

This speaks directly to first-time homebuyers with measures intended to curb rising prices and make it easier to start their homeownership journey.

#3: Banning foreign investment for the next two years

The budget also highlights the government’s commitment to cracking down on foreign buyers, a demographic they’ve pinpointed as a driving factor in soaring prices. 

To ensure Canadian house-hunters are prioritized over outside investors, the budget proposes restrictions that would prohibit foreign buyers (who aren’t Canadian citizens or permanent residents) from acquiring residential property here for two years.

The hope is that this creates a cooling-off period in the market and addresses the growing housing gap by  giving construction projects a chance to catch up. 

We’re currently on target to fall approximately 1.5 million housing units short of what we need to meet demand, and closing this gap could help keep property prices from continuing to climb.

But this issue is complex. While perhaps non-Canadian investors were an easy target, local investors contribute heavily to the gap, too.  

According to data released by Statistics Canada, local real estate investors with multiple properties own up to 30 to 40 percent of housing units in several provinces, including Ontario, British Columbia, and Nova Scotia. Knowing this, how effective will the foreign investor ban be? We’ll have to wait and see how Canadian buyers fare once it’s officially in place. 

#4: Taxing property flippers

The federal budget also includes changes that would curb profitability for Canadian real estate investors, the most notable of which is a proposal that any profits from flipping properties are fully taxed. 

Meant to discourage house-flipping, the proposed new rules would make it so that any person who sells a property they’ve held for less than 12 months is subject to full taxation on their profits as business income. This would apply to residential properties sold on or after January 1, 2023. 

Exemptions would apply to Canadians who sell their homes due to certain life circumstances (such as a death, disability, the birth of a child, a new job, or a change in marital status), but the intention is that by tightening up legislation in this area, people investing in homes will be more inclined to live in them long-term, rather than focusing on turning a profit in a competitive, expensive market. 

#5: Assignment sales tax 

Another factor that’s likely driving up home prices is investors purchasing pre-construction condo units and selling them before they’re completed. This has been a popular way for real estate investors to reap large financial gains in Canada’s most popular markets.

Along the same vein as the property-flipping tax, the government has outlined efforts to curb housing speculation (aka the buying and selling of pre-construction units for profit) by implementing a mandatory sales tax. 

Under the new budget, taxes would apply to all assignment sales of newly constructed or substantially renovated residential housing. 

Why? Under the current system, where rules are laxer, there’s too much opportunity for speculators to be dishonest about their intentions when they buy. 

By making the assignment sales tax mandatory, the intention is that these types of investment opportunities become a little less lucrative, and as a result, the enthusiasm for them dies down. 

Bonus: Keeping you up to date with data-driven insights 

While the federal budget’s proposed changes could be beneficial to homebuyers, it’s uncertain how impactful they’ll really be in the long term. But this uncertainty doesn’t have to stop you from exploring your options in the short term. 

If you’re thinking of buying or selling this year, use our free online tools to help you calculate your options. And, when you’re ready to meet with a real estate expert, the ones at Properly can give you the personal attention you need to make an informed decision, regardless of where the budget takes us.

*DISCLAIMER: This article is provided for informational purposes only. It is not an exhaustive review of this topic. The content is not financial or investment advice. No professional relationship of any kind is formed between you and Properly Homes Inc. While we have obtained or compiled this information from sources we believe to be reliable, we cannot and do not guarantee its accuracy. We recommend that you consult a trusted professional before taking any action related to this information. Properly is a tech-enabled real estate brokerage that is transforming the home buying and selling experience with AI-powered home valuations and a modern streamlined service. We recommend that you compare and contrast your options, read the fine print, and conduct detailed research into any real estate, loan, or investment provider before using their services.*

Properly is a Canadian tech-enabled real estate brokerage transforming the home buying and selling experience as the only service in Canada that helps homeowners to buy before they sell.