Prospective first-time home buyers who were hoping that the federal budget would unveil a suite of measures to cool runaway markets across Canada will be disappointed: Help isn’t coming. Not from the federal government, at least.
Granted, it is very hard to put a time machine – or a magic wand, or rich and generous parents – in a federal budget, which are perhaps the only mechanisms that could make home ownership immediately possible for first-time buyers who are suddenly being priced out of formerly accessible markets.
Never mind Toronto and Vancouver; in places such as Barrie, Ont., Halifax and Fredericton, the average selling price of a home in March has skyrocketed at least 34 per cent from the same month a year before. The average cost of a home in Canada is now a record-breaking $716,828, which is up more than 31 per cent since March of 2020. And needless to say, incomes have not increased at quite the same rate.
Home ownership might seem a somewhat trivial matter to consider in a pandemic-time budget that is overwhelmingly focused on health care, unemployment and economic recovery. But Canada is headed on a path where the security that comes with owning a home is becoming the domain only of those of a certain level of wealth, which doesn’t make for diverse, equitable or healthy cities, nor does it entice young talent to stay in or move to Canada.
Interested parties were thus looking to this budget for big, bold initiatives that, if combined, would have a cooling effect on markets without totally wiping out existing owners’ equity. That may have included a speculation tax on residential sales that would, for example, gradually decrease to zero after a certain number of years. Or massive investment in housing supply through mechanisms like federal loans for multi-family homes. Or co-operation with cities to loosen restrictive zoning regulations, and pressuring provinces to disallow real estate tactics such as “blind bidding” that drive up prices. Or the elimination of the capital-gains tax exemption for the sale of principal residences. Or a new national foreign buyers’ tax that would target vacant properties owned by non-residents. Or some combination thereof.
Instead, the federal government picked just one – a tax, 1 per cent annually, on vacant or “underused” residential property owned by non-residents – with consultations to come on how the tax might affect small tourism communities that could be negatively impacted by a national tax on foreign investment. This measure is perhaps least likely to provoke the ire of existing Canada homeowners, who tend to respond negatively to threats of new neighbourhood fourplexes or capital gains taxes, though it certainly won’t be enough to right-side the turn that markets across Canada have taken, especially over the last several months. Foreign buyers’ taxes implemented in B.C. (first 15 per cent, then raised to 20 per cent in certain regions) and in Ontario (15 per cent in the Golden Horseshoe) did have cooling effects on those markets after they were implemented a few years ago, but effects were temporary and hardly made home ownership accessible to those in the “missing middle” of real estate.
What was one of the flagship housing promises in the 2019 federal budget – the First-Time Home Buyer Incentive, through which new homeowners can lower their monthly payments via a shared equity mortgage with the government – gets virtually no mention in this budget. And it’s no wonder: As of Dec. 2020, the Canada Housing and Mortgage Corporation had approved just 10,600 applications, though the program was touted as a way to help 100,000 applicants purchase homes in three years. The poor uptake at this point is not exactly a surprise; the guidelines were simply too limiting, and with interest rates as low as they are and property values increasing so rapidly, it would make more sense to pursue alternative sources of financing rather than give the government 5 or 10 per cent of your home’s equity.
This budget does include some new and reallocated funding for the development of additional low-income and rental housing, which does help to boost overall supply. The government has promised, for example, an extra $1.5-billion for the Rapid Housing Initiative to build new affordable housing, as well as the reallocation of $300-million from the Rental Construction Financial Initiative to convert vacant office spaces into residential units.
But one new tax and additional funding for low-income housing will not reverse the runaway trends evident in markets all over Canada. For that, you need a comprehensive collection of often politically unpopular measures – or a time machine, or a magic wand.
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Robyn Urback