Why a program for first-time home buyers fizzled in Toronto and Vancouver

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Fewer than 400 households in the Toronto, Vancouver and Victoria areas have received financial assistance from a federal program for first-time home buyers, despite changes that were intended to make it more useable in pricier markets.

Over more than three years, 385 households have used the First-Time Home Buyer Incentive in those census metropolitan areas, according to a Globe and Mail analysis of figures that were recently tabled in Parliament. This amounts to a minuscule fraction of home purchases in those parts of Ontario and British Columbia.

Despite the low uptake, Ottawa extended the program through May, 2025. Even with that longer timeline, it is not on pace to help as many people as envisioned.

Under the program, the federal government contributes as much as 10 per cent toward the purchase of a first home, reducing the buyer’s monthly mortgage payments. Ottawa is eventually paid back for its stake in the property.

The FTHBI was announced with much fanfare during the 2019 budget. The federal government said it would help as many as 100,000 families purchase a first home, allocating $1.25-billion to Canada Mortgage and Housing Corp. to disburse over three years.

But since the program was launched in September, 2019, relatively few people have used it. Around 17,500 buyers across the country have received roughly $325-million in financial assistance as of early this year. Hundreds more have been approved, but have yet to receive their funding.

“We think this is a flawed policy,” said James Laird, the president of CanWise Financial, a mortgage lender. “We certainly have never promoted it to our customers.”

Several real-estate professionals say the program was basically doomed from the start. In its first iteration, the FTHBI allowed households with a maximum annual income of $120,000 to borrow four times that amount. For someone making a minimum down payment, the most expensive home they could purchase was $505,000.

Because of the program’s lending restrictions, most buyers could spend more by avoiding the program altogether. And with home prices rising quickly, fewer properties were cheap enough to purchase with the incentive.

Two years ago, the federal government tweaked the program for those in the Toronto, Vancouver and Victoria areas. Now, first-time buyers in those places can borrow 4.5 times a maximum annual income of $150,000. This effectively raised the maximum purchase price of a home to $722,000 for someone who earns the most allowed under the program and makes a minimum down payment. (The lending criteria remained the same for the rest of Canada.)

Despite these changes, the program has sputtered. In the Toronto area, 176 buyers had received the incentive as of early this year, 167 in the Vancouver region and 42 in Greater Victoria.

The incentive “never comes up” in talks with clients, said Scott Ingram, a real estate agent in Toronto.

“The program was recklessly rushed to market, inadequately thought out, overly convoluted and insufficiently marketed,” Robert McLister, mortgage strategist and editor of MortgageLogic.news, said in an e-mail.

The 2021 updates took effect as prices were accelerating again, fuelled by low-rate mortgages. Despite a recent slump in real estate, benchmark home prices remain well above $1-million in the Toronto and Vancouver areas.

Mr. Laird said home buyers generally aren’t keen to share equity in their properties with the federal government. Participants in the FTHBI have to repay Ottawa when the home is sold or after 25 years. The government shares in the appreciation of a home’s value over time, though last year it capped the gains it could receive.

“They’re not contributing to maintenance or if you put in a new kitchen,” Mr. Laird said. “But if you sell, they get their percentage.”

Mr. Laird also noted that buyers need to save enough cash for the minimum down payment, before Ottawa kicks in more money. Put another way, the federal government isn’t helping people save for a down payment.

In some markets, the FTHBI has proved relatively more popular. Nearly 2,700 buyers have received the incentive in Edmonton, the most of any municipality. Calgary follows at No. 2 with around 1,300 recipients. Over all, Quebec has more than 6,100 recipients of the incentive, the most by province.

Even so, these more affordable markets have generally experienced large price bumps in recent years, making the incentive program less viable than it used to be. Numbers provided by CMHC show that approvals under the FTHBI peaked early in its existence, but dropped significantly in 2021.

The incentive “is just one of a suite of programs through the National Housing Strategy to make housing more affordable for Canadians,” Mahreen Dasoo, a spokesperson for the Minister of Housing and Diversity and Inclusion, Ahmed Hussen, said in a statement.

Mr. Laird said it would be “refreshing” if the federal government acknowledged the program isn’t working and wound it down. The incentive is “what you would come up with if you didn’t understand how mortgages actually work in Canada,” he said.