Government Policy Changes
1. Cooling the Housing Market
With housing prices continuing to rise in high-demand cities like Toronto and Vancouver, the government has been exploring measures to cool the market without triggering a full downturn. Some of the ideas that have been discussed or implemented include:
Foreign Buyer Taxes: To reduce demand from non-residents and foreign investors who are driving up home prices, the government has introduced or increased taxes on foreign buyers in several provinces. The goal is to ensure that housing remains more accessible to Canadian residents.
Taxation on Empty Homes: Some provinces, particularly British Columbia and Ontario, have implemented taxes on vacant properties in an effort to encourage property owners to either rent or sell homes that aren't being used. This also aims to free up supply for people who actually need to live in these homes.
Increased Supply of Affordable Housing: There are continued efforts to encourage the construction of more affordable housing, both through private-sector initiatives and government-funded projects. For example, the National Housing Co-Investment Fund is one program that offers financial assistance to developers building affordable housing.
2. Helping First-Time Buyers
Recognizing that high home prices and increased borrowing costs are keeping many potential buyers out of the market, the government has been focused on providing support for first-time homebuyers. Some initiatives include:
First-Time Home Buyer Incentive (FTHBI): This program provides eligible buyers with a shared-equity mortgage (a loan from the government to help with the down payment) that can make a home purchase more affordable. The government takes a small equity stake in the home, which reduces the size of the mortgage and lowers monthly payments for buyers.
Home Buyers’ Tax Credit (HBTC): The federal government offers a tax credit of up to $750 to help first-time homebuyers with their purchase. The goal is to alleviate some of the costs associated with buying a home, such as legal fees, closing costs, and inspections.
Increasing the Home Buyers’ Plan (HBP) Limits: The HBP allows first-time buyers to withdraw up to $35,000 from their RRSPs (Registered Retirement Savings Plans) without penalty, provided the funds are used to purchase a home. Discussions have centered around potentially increasing this withdrawal limit to help more buyers.
3. Supporting Renters to Transition into Homeownership
There’s growing recognition that renters, especially in big cities, are struggling to save enough for a down payment on a home due to high rents and limited supply of affordable properties. To address this, the government is considering policies that could make it easier for renters to transition into homeownership. Some potential ideas include:
Down Payment Assistance Programs: The government has explored expanding down payment assistance programs to help renters who have difficulty saving enough for a down payment, particularly in expensive cities. This could involve grants or low-interest loans that help bridge the gap for eligible buyers.
Shared Equity Mortgages: Similar to the First-Time Home Buyer Incentive, a shared equity mortgage program could be expanded or modified to help renters who want to buy but cannot afford a full down payment. In these programs, the government would provide a portion of the home’s equity in exchange for a percentage of ownership.
Rent-to-Own Models: There’s also been talk of increasing support for rent-to-own housing models. These arrangements allow renters to eventually buy the home they are renting, with a portion of their monthly rent going toward the home’s future purchase price. Such programs could help renters save for a down payment while living in their future home.
4. Mortgage Insurance & Qualification Adjustments
Another important area under discussion is the possibility of adjusting mortgage insurance requirements and eligibility criteria, which could make it easier for buyers to qualify for mortgages, particularly those with smaller down payments:
Adjusting Stress Tests: The stress test, which forces borrowers to qualify at a higher interest rate than the one they’re actually offered, has been a barrier for many homebuyers. While it’s unlikely that the stress test will be eliminated, there could be discussions about adjusting the rules to make it slightly easier for buyers to qualify, especially in areas where housing prices are still high.
Mortgage Insurance Accessibility: Changes could also include making mortgage insurance products more accessible to first-time buyers or those with smaller down payments, so they can secure mortgages more easily, even with higher borrowing costs.
5. Focus on Sustainable Housing
Finally, there is a growing emphasis on building more energy-efficient homes and supporting environmentally-friendly housing development. The government may increase incentives for buyers who purchase energy-efficient homes or make sustainable upgrades to their existing properties. This could include offering better mortgage rates for buyers who invest in homes with lower carbon footprints.
