Ottawa to extend foreign homebuyers’ ban for two more years

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Ottawa will move to extend a ban on foreign ownership of Canadian housing for another two years, although housing experts argue the measure won’t likely make homes more affordable for average Canadian families.

Finance Minister Chrystia Freeland announced Sunday that the government plans to continue the ban, which had been set to expire next year, to January, 2027.

The decision follows Ottawa’s announcement two weeks ago of a cap on international students allowed into Canada, another attempt to improve the housing crisis by restricting demand for Canadian homes from outside the country’s borders.

The federal government introduced legislation to close the door on foreign ownership in 2022. The law prevents any non-Canadian businesses, as well as individuals who are not Canadian citizens or permanent residents, from buying homes or vacant residential land in cities or towns with a population of at least 10,000 people.

“By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class,” Ms. Freeland said in a press release.

When the legislation was first announced, Canada was following the lead of countries such as New Zealand that have adopted similar restrictions in a bid to improve housing affordability.

But the ban itself, said Ray Sullivan, executive director of the Canadian Housing and Renewal Association, does nothing to address the supply issue that is driving up costs, especially for low- and modest-income Canadians.

“It is an easy political solution to blame people who are not in the country,” Mr. Sullivan said. “But renters don’t care where their landlord lives. They care about how much rent they’re paying.”

Thomas Davidoff, a business professor at the University of British Columbia, said removing foreign buyers probably relieves some pressure on the housing market – although, he pointed out, in Vancouver, international buyers are mostly interested in luxury homes.

Dr. Davidoff also noted that a ban on foreign ownership is easy to administer and simple to explain on the campaign trail. “‘Those guys wanted your housing, and we protected you’ is probably more politically compelling,” he said.

But housing affordability is worsened by a lack of supply – and that’s an issue of housing use, he said, not the nationality of the owner.

“Rental housing provided by foreign owners is more useful to affordability than a vacation home for a rich guy who lives in Canada,” he said, making the case for the taxes on unused homes that have been adopted in cities such as Toronto, Ottawa and Vancouver. “Once you have empty home taxes, you don’t need a foreign buyer ban.”

Chris Alexander, the president of Re/MAX Canada, said that foreign buyers make up about 4 per cent of all real estate transactions – making them too small a group to have a significant impact on affordability. According to 2023 Statistics Canada data, non-residents own 7 per cent of all B.C. condos and 5.6 per cent in Ontario.

In fact, said Paul Kershaw, founder of the Generation Squeeze think tank and professor at the University of B.C.’s School of Population and Public Health, domestic investors play a far bigger role in increasing the price of homes in many markets.

One in six Canadians now owns multiple homes, he said, often using their wealth to outbid first-time buyers. But it’s politically challenging, he says, “to refocus the conversation on how everyday Canadian households are implicated, myself included, in the sort of addiction to high and rising home prices.”

Ottawa’s decision to extend the ban follows less than a week after Toronto Mayor Olivia Chow moved forward with plans to levy an extra 10-per-cent tax on international buyers when they purchase a home in the city. The policy, mirroring one in Vancouver, was meant to deter foreign speculation in the market and generate revenue for the city. The new tax was timed to come into effect when the original ban was slated to end in January, 2025.

Diana Mok, an adjunct finance professor at Western University, says all levels of governments will need to better co-ordinate their strategies to solve the housing crisis. Otherwise, she said, “one policy might end up defeating the purpose of the other.”

Meanwhile, Mr. Sullivan points out there is another ownership policy where Ottawa could make a significant difference on affordability – one demonstrated by countries around the world. He suggests that the federal government should do more to support non-profits purchasing existing affordable housing so those rents can be stabilized long-term. Currently, he says, the country is losing affordable housing much faster than it can be built, through demolitions, renovictions and tenant turnover that allow new owners and landlords to charge significantly higher rents.

A spokesperson in Ms. Freeland’s office said that the new legislation will extend the ban but not change any other parts. The current law includes a fine of up to $10,000 and the possible court-ordered sale of the property for anyone convicted of breaking the ban.

There are some exceptions to the ban, including for those with temporary work permits, refugee claimants and international students who meet certain criteria.

As well, less-populated rural areas are not covered by the ban, and foreign buyers can still purchase apartment buildings with more than three units.

Stephen Cryne, CEO of the Canadian Employee Relocation Council, which advocates for and helps domestic and transnational companies that move employees into and around the country, said the initial ban stopped international hires from taking jobs. But, after lobbying from his organization and others, Ottawa made an exemption for those aspiring buyers with work permits to purchase property.

With a report from The Canadian Press