The federal government has earmarked more than $10 billion in new spending for housing-related initiatives, much of which is focused on increasing supply.

Overall, the federal budget includes $56 billion in new spending over the coming years and will result in a projected deficit of $52.8 billion for the 2021-22 fiscal year.

In terms of housing initiatives, the budget delivers on a number of Liberal Party campaign promises made during the last election, with one notable exception. Absent was the proposal to increase the insured mortgage cut-off from $1 million to $1.25 million. 

The $10 billion in housing-related spending over the next five years includes:

• $4 billion for a new Housing Accelerator Fund. The fund will target the creation of 100,000 net new housing units over five years.

“The fund will be designed to be flexible to the needs and realities of cities and communities, and could include support such as an annual per-door incentive for municipalities, or up- front funding for investments in municipal housing planning and delivery processes that will speed up housing development,” the budget states.

• $475 million for a one-time payment to those facing housing affordability challenges. Although no specifics were included in the budget, the budget provides a one-time payment of $500 for those struggling with housing costs.
• Introduction of the Tax-Free First Home Savings Account. This will allow prospective homebuyers to save up to $40,000 in the account, with all contributions being tax-deductible and withdrawals to purchase a home being tax-free.
• Doubling the First-Time Home Buyers’ Tax Credit amount to $10,000. This works out to a benefit of up to $1,500for the homebuyer.
• Changes to the First-Time Home Buyer Incentive. The budget extends the $1.25 billion First-Time Home Buyer Incentive program to March 31, 2025. The program, administered by the Canada Mortgage and Housing Corporation (CMHC), was originally slated to expire this September. The government added that it’s exploring options to make the program “more flexible and responsive” to the needs of first-time buyers. Figures reported this week show that as of December, the government has approved just $270 million in shared-equity mortgages.

The government also introduced several measures it says will strengthen the integrity of the housing market and address foreign investment, property flipping and speculation.

A ban on foreign investment

The government plans to prohibit those who are not Canadian citizens or permanent residents from purchasing non-recreational residential property in Canada for a period of two years.

Crackdown on property flipping

New rules will be introduced that would subject any buyer who sells a property held for less than 12 months to full taxation on their profit as business income. Exemptions would be made for certain life circumstances, such as death, disability, the birth of a child, a new job or divorce.

Taxing assignment sales

The government will move forward with a plan to make all assignment sales of newly constructed or substantially renovated residential housing taxable for GST/HST purposes, effective May 7, 2022.

An end to blind bidding

The government will follow through with its election promise to end the practice of blind bidding as part of the development of a Home Buyers’ Bill of Rights. The budget outlines that this bill could also include ensuring a legal right to a home inspection and ensuring transparency on the history of sale prices on title searches.

“With these new initiatives introduced in the budget, it is more important than ever to have a broker advocating on your behalf to help you navigate the programs that are available and the restrictions that may apply to your circumstances when looking for a mortgage,” said Mark Kerzner, President and CEO of TMG The Mortgage Group.