Almost 740,000 people opened a first home savings account last year, nearly half of them with taxable incomes of $53,359 or less.
FHSAs are a small-scale but promising example of government policy aimed at helping middle-class young people get into the housing market. You can put up to $8,000 in these accounts each year to a maximum of $40,000. Contributions generate a tax refund, and both contributions and investment gains benefit from tax-free compounding and withdrawals. FHSAs are available to people aged 18 and up who did not own a home in the part of the calendar year before an account is opened or the previous four years.
The $40,000 contribution cap is just a drop in the bucket, with the average resale housing price of a bit more than $700,000 in April. But FHSAs are nevertheless helping people with middling incomes build down payments.
Federal government numbers show that 326,340 active FHSA holders – those making contributions to the accounts they set up – had a taxable income of $53,359 or less, which is 44 per cent of the total. Another 263,160 FHSA holders, or 36 per cent, had a taxable income from $53,360 to $106,717.
You can have an FHSA up until age 71, but the account can only be kept open for 15 years. An ideal time to set one up would be in your late 20s. You ideally have started to climb the salary ladder at this point, which enhances the value of the tax deduction for FHSA contributions. Also, you have a long runway to build a home down payment through contributions to your FHSA and investment gains.
FHSAs were launched in April, 2023, with few investment companies offering them to start. Yet the value of all FHSAs at the end of the year was $2.8-billion, with an average value of $3,900.
We are still many years from first-time buyers being able to say their FHSA was a difference-maker in getting into the housing market, but we’re off to a decent start. In 2023, a little over 34,000 FHSA holders made a withdrawal from their accounts. More importantly. FHSAs are catching on with exactly the people who will need all the help they can get to buy homes.