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Next year is an election.

Our federal government faces a growing issue of housing affordability across the country.  

Enter some housing policy reform.

Finance Minister Chrystia Freeland announced last week that they are going to make it easier for first buyers to buy a home.

Sort of.

In reality, it will help a few hopeful home buyers enter the market – but the impact will be quite limited.

I’ll explain what they have proposed, and maybe it can help you on your path to home ownership!

The Liberals have also updated the housing plan. Its aim, to increase the supply of homes by 2031. There might be promise here if they can deliver.

Now, let’s dive in.

The Federal Government announced that they will increase the RRSP withdrawals under the Home Buyers Plan (HBP). The new limit is $60,000 per person, up from $35,000. The change is effective April 16.  

The goal with this policy is to give buyers a leg up on their down payment to help them boost their budget.

The problem though…

What First Time buyer has $60,000 in their RRSP?

Unfortunately announced after March 1 cut off for contributions to the 2023 tax year. 

You could add to your 2024 contributions to boost your 2025 tax return. But, remember, the funds must be in an RRSP for 90 days before you can withdraw them to buy a home.

The down side of this policy, it shifts more money from capital markets into housing.  

Already a big issue in Canada.

Keep in mind, the HBP is a loan to yourself from your retirement.  Using this might push your retirement back years.

You’ll also have to pay back $60k over 15 years, instead of $35k. 

That’s an increase to $4k/year in RRSP contribution with no tax reduction, up from $2333.33.

If you’re going to use it, make sure you budget for the repayment, or they will tax it as income in future years.

The second announcement was an increase to amortizations from 25 to 30 years. It applies to first time home buyers with less than 20% down on homes under $1,000,000. It only applies to newly constructed homes and is effective August 1.

Ya, my head is spinning too.

Amortizations are the full amount of time it will take to repay the mortgage.

This increases how much you qualify to spend on a home by about 5%.

Unfortunately if you’re in the GTA, this is pretty useless.  

This restriction would limit it to condos in the GTA by only applying it to new builds.

Most new builds currently need 20% down on new builds in the GTA

Opportunities to use this will be hard to find, rendering it pretty useless.

But, just maybe, it drives builders to build more homes at a price point suitable for first time buyers.

The day after The Finance Minister’s announcement, we got one from the Prime Minister and the Housing Minister.

Here we finally got some policies focused on trying to meet our housing supply shortages.

The key updates here were…

• A tax incentive aimed to boost profits for builders of apartments
• Banning the purchase of existing single family homes by large Corporate Investors (ex. Hedge Funds)
• Making Government Programs Easier and Faster to Use
• Launching low cost loans to build apartments on top of Businesses, or in unused Basements and Garages
• Further incentivizing densifying of existing homes
• CRA income verification on mortgage applications to reduce fraud

There’s a lot of promises, and some big issues to fix.

But there are some great proposals here. If they can follow through on them, they might make big differences.

Here’s hoping they can deliver!

You can access the full document here:

https://www.infrastructure.gc.ca/alt-format/pdf/housing-logement/housing-plan-logement-en.pdf

I hope the updates will allow you to achieve your housing goals.

If you have any questions about these policies, feel free to reach out!