Housing was the focus of today’s federal budget.
Federal Budget 2022 had a significant focus on housing for Canadians. Finance Minister Chrystia Freeland laid out how the government is planning to address housing affordability by adopting policies in three categories: building, saving and anti-flipping/foreign investment.
“This was a housing-focused budget and there’s considerable detail within the document that we need to analyze and better understand,” REBGV Chair Daniel John said. “We support the government’s recognition that we need to create much more abundant and diverse forms of housing supply in the country. We also support actions to help young people save for a down payment in Canada.”
“Where we urge caution is in policy measures that insert the government into the sale of private property. That kind of intervention should be done seldomly, carefully and with the rights of all parties in mind,” John said. “We look forward to being involved in the ongoing conversation around improving housing affordability and how these measures will be implemented.”
Our Government Relations team has begun a comprehensive review of today’s housing policy announcements. We’ll provide more information and analysis as we complete this work.
Here’s our initial summary of the housing measures announced today.
The goal is to double housing construction by 2032. This will require investments and changes to existing systems that prevent more housing from being built, including:
- A new Housing Accelerator Fund: $4 billion over five years, starting in 2022-23. This will provide support to municipalities, such as an annual per-door incentive or up-front funding for investments in housing planning and delivery processes that speed up housing development.
- Extension of the Rapid Housing Initiative: $1.5 billion over two years, starting in 2022-23 to create at least 6,000 new affordable housing units, with at least 25 per cent of funding going towards women-focused housing projects.
- A new Multigenerational Home Renovation Tax Credit: provides up to $7,500 to support construction of a secondary suite for a senior or an adult with a disability, starting in 2023.
- A new Tax-Free First Home Savings Account: first-time home buyers can save up to $40,000 tax-free. Like RRSPs, contributions would be tax-deductible, and withdrawals to buy a first home, including investment income, would be non-taxable, like a TFSA. Tax-free in, tax-free out.
- First-Time Home Buyers’ Tax Credit: double the amount to $10,000, providing up to $1,500 in direct support to home buyers, applying to homes bought on or after January 1, 2022.
- Home Accessibility Tax Credit: double the qualifying expense limit of the to $20,000 for 2022 and subsequent tax years. This tax credit of up to $3,000 is an increase from the previous tax credit of up to $1,500 for important accessibility renovations or alterations.
- Flipping tax: anyone selling a property they’ve held for less than 12 months will be taxed on their profits as business income, applying to residential properties sold on or after January 1, 2023. There will be exceptions for Canadians selling their home due to life circumstances such as a death, disability, the birth of a child, a new job, or a divorce.
- Foreign ownership restrictions: to prohibit foreign commercial enterprises and non-Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada for a period of two years. This will apply to detached homes and stratas. Permanent residents, foreign workers, foreigners buying their primary residence, and students will be excluded from the new legislation.
- Review of housing as an asset class: to better understand the role of large corporate players in the market and the impact on renters and homeowners, the government plans to look at options and tools, including potential changes to the tax treatment of large corporations investing in residential real estate.
- $1 billion for the construction of affordable housing units; and
- $2.9 billion in loans and funding for co-op housing to accelerate the creation of up to 4,300 new units and the repair of up to 17,800 units.
New taxes GST/HST on assignment sales: Budget 2022 proposes to make all assignment sales of newly constructed or substantially renovated residential housing taxable for GST/HST purposes, effective May 7, 2022. The federal government wants homes to be lived in and not commodities to be traded and profited upon by housing speculators. The GST/HST has not been applied if the buyer initially intended to live in the home, which may have led to speculator dishonesty and the uneven application of GST/HST to the full and final prices of new homes.
Two new tax measures are expected to raise $6.1 billion over five years:
- Canada Recovery Dividend: a new, temporary, one-time 15 per cent surtax on banks and insurance companies on taxable income above $1 billion for the 2021 tax year. It will be paid in equal installments over five years.
- Corporate income tax rate increase: the government will permanently increase the tax rate by 1.5 percentage points (to 16.5 from 15 per cent) on the taxable income of banking and life insurance groups above a threshold of $100 million. This is expected to raise $445 million ongoing.