6 Ways The Feds Are Making Housing More Affordable For First-Time Home Buyers In Canada
Make the most of these programs!🔑🏠
As part of the federal budget 2022, the government has laid out its plan to make housing more affordable for young people and first-time home buyers in Canada.
From investments in new housing, to curbs on foreign buyers, and new accounts to help Canadians save as much money as possible, the feds have announced a number of strategies to help make property more accessible.
Here's a look at what's changing following the budget and how it may impact the Canadian housing market and your plans to get on the property ladder.
Tax-free First Home Savings Account
Released on April 7, the budget proposes to introduce the "Tax-Free First Home Savings Account."
This would give prospective first-time buyers the ability to save up to $40,000.
Just like a Registered Retirement Savings Plan (RRSP), contributions to the account would be tax-deductible and withdrawals to purchase a first home would be non-taxable, like a regular Tax-Free Savings Account (TFSA).
"Tax-free in, tax-free out," says the government.
It's expected that Canadians will be able to open these accounts and start saving from them as early as 2023.
The maximum annual contribution limit will be $8,000 per year. If a prospective home buyer saved that amount, they'd be able to gain around $1,640 in a refund at tax time.
First-Time Home Buyers' Tax Credit
To help Canadians offset the closing costs that come with buying a home, the feds have plans to double the First-Time Home Buyers’ Tax Credit amount to $10,000, up from $5,000.
This will provide up to $1,500 in direct support to home buyers and will apply to properties purchased on or after January 1, 2022.
More information about eligibility can be found online, but it's generally available to those who are buying their first house and who are buying a qualifying property.
First-Time Home Buyer Incentive
To help newbie homeowners lower their monthly payments, the 2022 budget also proposes an extension to the First-Time Home Buyer Incentive.
The feds want to extend the support program until March 31, 2025, allowing more people to access it for longer.
"The government is exploring options to make the program more flexible and responsive to the needs of first-time home buyers, including single-led households," it said.
Through the incentive, the government offers buyers between 5% and 10% of a home's purchase price to put toward a down payment, to reduce their monthly mortgage payment costs.
Tackling rising costs
"Houses should be homes for Canadians to live in," reads the budget.
In order to make more houses available to Canadians, the government is moving to make it illegal for foreign buyers to purchase residential properties in Canada for the next two years.
They say this will ensure houses are being bought to be used as homes, rather than as investments alone.
The foreign buyers ban will apply to condos, apartments, and single residential units.
Additionally, budget 2022 proposes new rules to target people who are "flipping" houses.
As of January 2023, anybody selling a property they have owned for less than a year would be considered to be "flipping" it and therefore be subject to full tax on their profits as business income. Exceptions will apply, though.
Building more homes
To make housing more accessible and affordable, the Government of Canada wants to put the country "on the path to double housing construction over the next decade."
This will include investments of $4 billion for the launch of a new Housing Accelerator Fund, which officials say will help create 100,000 new housing units over the next five years.
Additional investments
To help Canadians save for and buy their first home, the Government of Canada is investing $200 million in developing and scaling up rent-to-own projects all over the country.