Freeland announces housing affordability measures for first-time buyers, current owners
Deputy Prime Minister and Finance Minister Chrystia Freeland announced a number of housing afford‐ ability measures Thursday that she said will help buy‐ ers get their first homes and help current home‐ owners afford the homes they have.
"I really hope and believe the specific measures we an‐ nounced today are going to provide a lot of comfort and a lot of hope to young Cana‐ dians," she said in Toronto.
Freeland announced that effective April 16, the amount first-time home buyers can withdraw from their RRSPs to make a down payment on their first home will rise from a maximum of $35,000 to $60,000.
"This, plus the Tax-Free First Home Savings Account, can be combined, which will give younger Canadians more tools to save what is ac‐ tually needed," she said.
The Tax-Free First Home Savings Account program al‐ lows Canadians to save up to $8,000 per year toward a home, with a maximum life‐ time contribution limit of $40,000.
Contributions to the ac‐ counts provide people with tax rebates. Growth in the ac‐ counts is not taxed and mon‐ ey can be taken out tax-free for a down payment.
Extending RRSP repay‐ ment period
Freeland also said she is more than doubling the time allowed for Canadians to start repaying their RRSP contributions once they have made a withdrawal to pay for the deposit on a home.
She said first-time home buyers who withdraw money from their RRSPs between Jan. 1 2022 and Dec. 31, 2025 will now have five years to begin repayments, instead of two.
Freeland also announced changes to the amortization schedule for mortgage repay‐ ments.
She said that beginning Aug. 1, first time home buy‐ ers with insured mortgages who purchase a newly-built home will get 30 years to pay that mortgage back so "more younger Canadians can af‐ ford to pay that monthly mortgage on a new home."
Changes to the mort‐ gage charter
Under the Canadian Mort‐ gage Charter announced in the fall, the federal govern‐ ment requires that banks reach out to homeowners four to six months in ad‐ vance of their mortgage re‐ newal date to inform them of affordability options.
Freeland said Thursday lenders will now have to con‐ tact borrowers "up to 24 months in advance of a homeowner's mortgage re‐ newal" to discuss options.
The Mortgage Charter al‐ so requires that lenders pro‐ vide temporary extensions on the amortization period for mortgage holders who were facing financial difficul‐ ties. Freeland said Thursday that temporary measure is now being made permanent.
She said that "depending on a homeowner's circum‐ stances," the amortization period can be made perma‐ nent, even for people with in‐ sured mortgages, and mak‐ ing that change will not come with any extra fees or penal‐ ties.
Other Mortgage Charter measures targeted at "vul‐ nerable borrowers" under fi‐ nancial strain that were an‐ nounced in the fall include:
Waiving fees and costs that would otherwise have been charged for mortgage relief mea‐ sures. Exempting in‐ sured mortgage holders from re-qualifying un‐ der the stress test when switching lenders at the time of a mortgage re‐ newal. Allowing borrow‐ ers to make lump sum payments to avoid neg‐ ative amortization or sell their principal resi‐ dence without incurring prepayment penalties. Waiving interest on in‐ terest when mortgage relief measures result in mortgage payments that fail to cover in‐ terest payments on a loan.
PBO says Canada needs 1.3M new homes by 2030
Earlier Thursday, the par‐ liamentary budget officer re‐ leased a report saying Cana‐ da will need to build 1.3 mil‐ lion additional homes by 2030 to eliminate the coun‐ try's housing gap. The new report looks at how many more homes are needed to restore Canada's vacancy rate to its historical average.
The report by Yves Giroux's office also accounts for the number of additional households that would form if sufficient housing were available. Based on those benchmarks, the PBO esti‐ mates that Canada would need to build 181,000 more homes per year than it cur‐ rently does.
The report does not take into account recent federal efforts to bolster housing supply or Ottawa's new cap on temporary residents.
WATCH: Freeland unveils new measures for firsttime home buyers:
The Canada Mortgage and Housing Corporation has said Canada needs to build 3.5 million more homes by 2030 to restore affordability to 2003-04 levels.
Giroux said his estimate is much lower than that of the CMHC because he looked on‐ ly at closing the gap between demand and supply.
The Liberal government has made a string of housing announcements ahead of the federal budget, largely aimed at increasing housing supply. The proposed measures in‐ clude billions of dollars in low-cost loans to spur more rental construction, as well as infrastructure funding for provinces and municipalities.
Conservatives, Home Builders Association weigh in
The Canadian Home Builders' Association issued a statement welcoming the 30year amortization period an‐ nounced by Freeland, saying the measure will "go a long way" toward turning the market around.
"Through this announce‐ ment, the government has recognized that we need to get first-time home buyers into the market," said the as‐ sociation's CEO Kevin Lee.
The Conservatives did not directly address the new measures announced by Freeland Thursday. Instead, they issued a statement say‐ ing that after eight years of Prime Minister Justin Trudeau's government, Cana‐ da has been left with a "his‐ toric housing crisis."
"Canadians are living through this housing hell be‐ cause Trudeau has failed to build enough homes for Canadians to live in," the statement said.
"This was confirmed again today by the Parliamentary Budget Office, who reported that Canada needs 1.3 mil‐ lion more homes than what is already forecasted to be built."
WATCH | Canadian Home Builders' Association CEO on Freeland's an‐ nouncement: