Ottawa aims to assist first-time homebuyers
Federal changes include expanding amortization period and larger tax free contributions
Niagara Centre Liberal MP Vance Badawey says it’s not just the federal government’s responsibility to address the country’s housing shortage, but all levels of government to make sure homes are being built.
“It’s also ensuring the provincial government comes on board (and) working with municipalities,” said Badawey. “We are helping firsttime homebuyers save for a down payment faster.”
Badawey, parliamentary secretary to the transportation minister, was joined by Small Business Minister Rechie Valdez Friday in Welland to announce several financial changes to encourage first-time homebuyers.
“We are doing everything in our power to help Canadians save for a home they can afford,” said Valdez, who was making the announcement where Mountainview Building Group will be constructing 167 single family homes and townhouses at the corner of South Pelham and Webber roads.
Valdez said the federal government will allow 30-year amortization periods on insured mortgages for first-time homebuyers effective Aug. 1.
Under the current rules, if a down payment is less than 20 per cent of the home price, the longest allowable amortization is 25 years.
“This will help residents of Niagara Centre by making life more affordable,” said Badawey.
Canadian Home Builders’ Association applauded the federal government’s announcement, calling it a “game-changer” for individuals “who have been struggling with housing affordability.”
“This measure will also go a long way to enable our sector to respond to the government’s goal of getting 5.8 million homes built over the next decade,” the association said in a statement.
Prime Minister Justin Trudeau revealed during a Friday announcement in Vaughan — days before presenting the 2024 federal budget — that his government will build about 3.9 million homes by 2031.
Canada Mortgage and Housing Corp. said the country needs to build 3.5 million homes by 2030 to restore the affordability to 2003-04 levels.
An RBC report said the share of Canadians who can afford to buy a home has dropped. Forty-five per cent of households have the income to own a condo, and 26 per cent have enough for a single-family home, a decline from 61 per cent and 49 per cent, respectively, 20 years ago.
And for individuals who rent, the rental vacancy rate has dropped to 1.5 per cent in Canada, which is below the three per cent rate considered balanced. Meanwhile, rental rates have skyrocketed.
More than 40 per cent of the one million new households that won’t be able to buy a home by 2030 will also not earn enough to afford rent at the market price, according to the report.
Valdez said the government will also raise the amount first-time homebuyers can withdraw from their RRSP from $35,000 to $60,000 to buy a home beginning Tuesday, when the federal budget will be unveiled.
People who have made or will make withdrawals between Jan. 1, 2022, and Dec. 31, 2025, will also receive more time to begin repaying the funds — up to five years in total rather than two years.
“It will be tax-free in and tax-free out,” said Valdez.
The change will work with the First Home Savings Account program the federal government launched last year. It allowed homebuyers to start saving for up to 15 years once they open an account, with an annual $8,000 deposit cap and a lifetime contribution limit of $40,000.
Valdez said more than 750,000 Canadians have opened an account.
There will also be “enhancements” made to the Canadian Mortgage Charter that will include an expectation that financial institutions offer permanent amortization relief to protect existing homeowners who meet certain eligibility criteria.
Both Valdez and Badawey acknowledged a factor in the housing crisis is the lack of supply to meet the high demand. They said everything that can be done is being done to encourage more housing to be built, such as: accelerating housing project approvals; using new technology to development and adopt innovative designs; easing zoning restrictions; lowering the cost of building new housing; and expanding the housing stock.
Valdez encouraged builders to focus on constructing needed apartments and affordable housing.
Valdez said, unlike Ontario Premier Doug Ford, she supports building fourplexes, especially in densely populated areas such as Mississauga, where her riding is located.
“We need to have more creative ways to densify the area,” Valdez said.