THE 2022 BUDGET

Earlier in April, the 2022 Budget was announced. To the surprise of many, it wasn’t as bad as most feared it would be. The Budget was announced on April 7 by finance minister Chrystia Freeland, calling it  “A Plan to Grow Our Economy and Make Life More Affordable,”

Many topics are addressed in this proposed budget, such as housing, climate, jobs, growth, affordability are just some among others.

When it came to the Housing Market and its focus, 4 main areas were discussed - Building, Savings, Anti Flipping, and Banning Foreign Investment. The 2022 Budget also touched on a Homeowners Bill of Rights and looked to expand the low supply in order to help young Canadians save. 

Building

The Building portion of the Budget clearly recognizes that we are in a “housing shortage. Increased supply is the most effective way to make housing more affordable - which is a fact the Real Estate boards across Canada have only been saying for 3 years now. The path is to double housing construction over the next decade (currently 200,000 units per year) across Canada. This will involve changes to the systems that are preventing more houses from being built which is great news. In order for this to work, this plan will also require investments. To improve affordability, around 3.5 Million homes will need to be built by 2031. The CMHC plans to implement a “New Housing Accelerator” fund is set to start in 2022-23 with plans to provide 4 billion over the next 5 years. The goal of this new fund would be to build 100,000 new housing units in that time. 

One of the better features of this section is that it is flexible to the needs and realities of the cities and communities. It is also creating an Annual per door incentive or up front funding for investments in municipal housing planning and delivery processes. The goal is to speed up housing development - incentive toward the cities. In a nutshell, 1.5 Billion in the next 2 years to extend the Rapid Housing Initiative. This new fund is expected to create at least 6,000 new affordable housing units with a least 25% of funding going towards women-focused housing projects. As well as, introducing a Multigenerational Home Renovation Tax Credit. This will provide up to $7500 in support for construction of a secondary/inlaw suite for a senior or an adult with disability - starting 2023. “This is the most ambitious housing plan to tackle supply and it’s also just a first step,” Finance Minister Chrystia Freeland told reporters

Saving

This portion introduces a Tax Free First Home Savings Account (TFFHSA) prospective home buyers the ability to save up to 40k tax free - approximately 8k per year. Each individual in a household can save in their own TFFHSA - (ex. A couple buying can save up to 80k) 

Like an RRSP contributions are tax deductible, withdrawal would be non taxable - so, tax free in, tax free out. Additionally you can make the transfers from your RRSP to the TFFHSA and your account can stay open for 15 years.  This will double the first time home buyers tax credit amount to 10k while providing up to 1500 direct support to home buyers - home purchase Jan 1 2022 or later. This is expected to Roll-Out in 2023 and the First Time Home Buyer Incentive will be extended to March 31st 2025. The Federal Government is exploring more options that will make it more flexible and responsive to the needs of homebuyers

Anti Flipping

The overall goal of Anti Flipping is to ensure profits from flips are taxed fully and fairly.

Proposes to introduce new rules for people who sell after owning for less than 12 months and will be subject to full taxation on their profits as business income. Exemptions for certain life circumstances, such as a death, disability, birth of a child, a new job or a divorce. Anyone who sells a property they’ve held for less than 12 months would be considered to be “flipping”

Foreign Investment

In order to make sure housing is owned by Canadians, it is proposed that we would prohibit foreign commercial enterprises and non canadian citizens or permanent residents from acquiring non recreational, residential property in Canada for a period of 2 years. Citing the influence of foreign money on rising home prices in cities such as Toronto and Vancouver

Refugees and students would be among those exempted from this proposed law.

Homeowners Bill of Rights

The Homeowners Bill of Rights is aimed at increasing fairness in the marketplace while calling to put an end to the blind bidding process. It was recently announced that Blind Bidding will become optional starting in April 2023. There are potential measures to make a home's sale price history more transparent and ensure a legal right to a home inspection before buying. These measures are being explored in order to tamp down on the investing and speculation side of the real estate market. There are plans for a federal review to learn more about the role large corporate landlords play in the market and the impact on renters and homeowners

All and all, I am quite happy with the announcements. Finally, the government has recognized the lack of supply as the key influencer on rising house prices and not low interest rates, or lack of taxes on homeowners. We need supply! As a younger agent, I’m very happy with the TFFHSA announcement and have already put plans in place to have one set up for my fiance! Unfortunately, as the market is now shifting into a Buyers Market, and inventory is consistently doubling the amount of homes sold, I fear this is several years too late. 

If you want to read more visit  “A Plan to Grow Our Economy and Make Life More Affordable,”