As expected, the 2022 Federal Budget contains a plan to help first-time homebuyers get a foothold in Canada’s increasingly unaffordable housing market.
The budget has introduced the Tax-Free First Home Savings Account, which will help first-time homebuyers save as much as $40,000. The account will function like an RRSP, meaning contributions are tax-deductible and withdrawals towards the purchase of a first home will not be taxed, much like a TFSA.
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- Ban on Foreign Buyers to Be Included in Federal Budget
In order to bring the Tax-Free First Home Savings Account to life, the federal government is working with financial institutions to ensure it’s operational by next year. The federal Liberals have said that, if successful, the Tax-Free First Home Savings Account could see up to $725M go towards the purchase of first homes in five years.
The government will also double the First-Time Home Buyers’ Tax Credit, which was introduced in 2009, to $10,000, including up to $1,500 in direct support to homebuyers.
Introduced in the 2019 federal budget, the First-Time Home Buyer Incentive is an equity stake the government takes first home purchases, which it later recoups as a percentage of equity appreciation, and the 2022 federal budget is extending it to March 31, 2025. The government additionally announced that it is looking for ways to tweak the program and make it more flexible and attainable for single-parent households.
Also included in the 2022 budget for first-time homebuyers is a promise to support rent-to-own purchases, which involve investors buying a home that their tenant eventually buys back from them. As homeownership becomes more unattainable with each passing month, the government will help scale rent-to-own projects countrywide by earmarking $200M in support under the Affordable Housing Innovation Fund, which was created six years ago. Half the funds will support non-profits, co-ops, developers, and to rent-to-own companies that will develop new units under the model.
Additionally, the government’s involvement in the rent-to-own sector is also intended to abet more affordable rentals. Eligible projects must have safeguards and strong consumer protection, and the funds can also be allocated towards repairs and renewals in rent-to-own properties, as well as programs that assist rent-to-own participants prepare for homeownership.
