Making Housing Affordable in Canada

Canada’s 2022 Budget includes homeowner protections and incentives

In the recently proposed 2022 budget, the federal government of Canada committed to tackling the dramatic increases in the cost of housing and the resulting impact it is having on Canada’s economy.  The measures proposed in the budget  include:

• Investing $4 billion to launch a new Housing Accelerator Fund that will help create 100,000 new housing units over the next five years; and providing $1.5 billion to extend the Rapid Housing Initiative and create at least 6,000 additional affordable housing units across Canada.
• A Tax-Free First Home Savings Account to allow first-time homebuyers to save up to $40,000; doubling the First-Time Home Buyers’ Tax Credit to $10,000, providing up to $1,500 in direct support to home buyers; extending the First-Time Home Buyer Incentive to March 31, 2025, to allow first-time homebuyers to lower their borrowing costs; and investing $200 million to help develop and scale up rent-to-own projects across Canada.
• Reallocation of $500 million of funding from the National Housing Co-Investment Fund to launch a new Co-operative Housing Development Program to expand co-op housing in Canada. This new program will be co-designed with the Co-operative Housing Federation of Canada and the co-operative housing sector.
• An additional $1 billion in loans to be reallocated from the Rental Construction Financing Initiative to support coop housing projects.
• Protecting home buyers by working with provinces and territories to develop and implement a Home Buyers’ Bill of Rights and bring forward a national plan to end blind bidding.
• Restrictions that would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring nonrecreational, residential property in Canada for two years. Refugees and people who have been authorized to come to Canada under emergency travel while fleeing international crises would be exempted.  International students on the path to permanent residency would also be exempt in certain circumstances, as would individuals on work permits residing in Canada.

In addition to the federal proposal, which, of course, will apply across Canada, several of Canada’s ten provinces have already enacted or are contemplating incentives and laws that make housing more affordable.

Relative to foreign investment, the Province of Ontario has imposed a 15% Non-Resident Speculation Tax (NRST) in addition to the already existing land transfer tax on properties purchased in the Greater Golden Horseshoe Region (a large area surrounding Toronto) by purchasers who are not citizens or Permanent Residents of Canada.  As of March 30, 2022, the tax was increased to 20% of the purchase price and now applies throughout the province.  Exceptions may apply.

British Columbia has also implemented a foreign investment land transfer tax in addition to the transfer tax already in place. A foreign national must pay an additional property transfer tax and PTT at the rate of 20% of the fair market value of the residential portion of the property if the property is within certain specified areas of B.C. Exceptions may apply.

Nova Scotia has proposed a new tax of 5% to be imposed upon non-resident purchasers of residential properties.  The tax would apply to any non-resident of Nova Scotia who does not intend to move there within six months and live there for more than 183 days of the year. There will also be a new provincial property tax that will be an additional $2.00 per $100 of assessed value for any non-resident of Nova Scotia unless the property is tenanted.  Unlike the other jurisdictions targeting non-residents of Canada, the term “Non-Resident” in this legislation will apply to anyone who is not a resident of Nova Scotia.

IMPACT ON RELOCATION TRANSACTIONS

Whether an employer uses a Buyer Value Option policy or a Guaranteed Buy Out policy, the practice of using a deed in blank avoids having the Relocation Management Company register title, thereby avoiding land transfer taxes.  Such transactions will not be impacted in provinces where non-resident taxes are tied to land transfer taxes.  However, vacant property taxes may have an impact when properties are held in inventory.  Of more concern to the relocation industry are the proposed restrictions contained in the recent federal budget.  Forthcoming draft legislation will determine how the restrictions will be applied and whether it will be necessary for representatives of the relocation industry to lobby the government in recognition of the unique reason why U.S. based Relocation Management Companies purchase properties in Canada is forthcoming.