Budget 2022: Upcoming Tax-Free Savings Account for First-Time Homebuyers – National

The Liberal government plans to spend $10.14 billion on housing over the next five years in its 2022 federal budget, seeking to make homes more affordable by expanding supply and helping young Canadians save for their lives. first house.

Ottawa’s spending document also includes plans to double the pace of residential construction in Canada over the next decade, support those already struggling to find housing and limit profits in the sector.

Here is what the government is proposing to try to make housing more affordable.

What is a tax-exempt home savings account used for?

Budget 2022 provides for the creation of a new Tax-Free Home Ownership Savings Account (TFFHSA) to help Canadians struggling to enter the housing market save for the cost of a down payment.

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Real estate hopefuls could save $8,000 a year up to a maximum of $40,000 per person when buying a first home. If you’re buying as part of a household, each individual who invests in buying a home can save in their own TFFHSA.

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Like existing tax-free savings accounts, withdrawals from a TFFHSA would be tax-free, including any investment income generated in the account.

Contributions are also tax deductible, like a registered retirement savings plan.

“Tax-free in, tax-free out,” the budget document says.

Sahir Khan, executive vice-president of the University of Ottawa’s Institute for Fiscal Studies and Democracy, says the TFFHSA appears to be a “fairly generous measure” in Budget 2022.

“Getting that down payment is probably the most daunting problem for young people trying to enter the housing market,” he told Global News.

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“Can’t afford to buy a house? Have you tried to find richer relatives? ”: MPs debate affordable housing in Canada

“Can’t afford to buy a house? Have you tried to find richer relatives? ”: MPs debate affordable housing in Canada

“In terms of removing a key barrier to accessing the property market, this seems like a very important step.”

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The TFFHSA is expected to be rolled out in 2023. Federal estimates put the overall economic impact of the account at $725 million over five years.

The budget proposes to double the first-time home buyers‘ tax credit to $10,000, retroactive to any home after purchase on January 1, 2022.

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Similarly, the First-Time Home Buyer Incentive will be extended until March 31, 2025.

The federal government says it is exploring options to make the program “more flexible and responsive” to news from potential buyers.

The budget document specifically stated that single-income households were to receive additional assistance.

Will the 2022 budget increase housing supply?

The Liberal government began the preamble to its budget document by saying that Canada was facing a “housing shortage” and claimed that increasing the supply of housing was the most effective way to make housing more affordable for Canadians.

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Canada will need to build about 3.5 million by 2031 to improve affordability, the budget predicts.

To achieve this, the budget plans to double the annual rate of construction in the country over the next decade, from the current 200,000 units per year.

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Part of this will see the creation of a $4 billion Housing Accelerator Fund, managed by Canada Mortgage and Housing Corporation (CMHC), with the goal of creating 100,000 net new homes over the next next five years.

Details were sparse in the budget document, but the fund could include measures to incentivize municipalities to speed up development approvals for new construction.

“This is the most ambitious housing plan to tackle supply and it is also just a first step,” Finance Minister Chrystia Freeland told reporters before tabling the budget on Thursday.

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CMHC’s Rapid Housing Initiative is receiving an additional $1.5 billion in the budget and will be extended for two years.

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Khan told Global News that the federal budget got “the diagnosis” of housing affordability issues in Canada “quite right…that’s the supply.”

But expanding supply itself isn’t the stand-alone solution, Khan said — it’s “density” that Canadian cities will need.

Other elements of the budget aimed at increasing immigration flows to Canada will only increase demand on Canada’s already limited housing stock, reinforcing the need for greater intensification in cities and less suburban sprawl.

Things like the Housing Acceleration Fund, which aim to sweeten the deal for cities by adding density to their neighborhoods, will have to accompany a cultural shift that will see Canadians get used to a different lifestyle, says Khan.

“At the end of the day, as Canadians, I think we’re going to have to rethink what it means to own and have the single-family detached house with the white picket fence, and think about densification,” he said.

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Will these plans really make real estate fairer?

The budget also includes hints of upcoming policy changes aimed at improving fairness in the Canadian housing market.

One is a proposal to set aside $475 million over the next fiscal year to provide a one-time payment of $500 “to those facing housing affordability issues.”

The federal government said the details and delivery method of that support would be announced “at a later date.”

In addition, the budget provides for the exploration of a homebuyer’s bill of rights.

This bill would include a plan to end “blind bidding” practices nationwide, with potential measures to make a home’s sale price history more transparent and secure a legal right to a home inspection before buying.

Measures have also been taken to reduce the investment and speculative side of the real estate market.

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The budget includes plans for a federal review to learn more about the role big business owners play in the marketplace and the impact on tenants and landlords.

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Meanwhile, no concrete action was included in the budget to deal with so-called “renovictions” – large landlords buying up low-income housing and evicting existing tenants only to put units back on the market at a higher rate.

The budget established new rules for taxing real estate pinball machines. Anyone who sells a property they’ve owned for less than 12 months would be considered a “flipping” under the new rules and subject to tax on their profits as business income.

Finally, the government also announced its intention to explore a two-year ban on foreign ownership in the budget.

Citing the influence of “foreign money” on rising house prices in cities like Vancouver and Toronto, the federal government said it intended to “propose restrictions that would prohibit foreign business enterprises and persons who are not Canadian citizens or permanent residents to acquire non-recreational property. , residential property in Canada for a period of two years.

Refugees and international students would be among those excluded from the proposed law.

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Khan says that although foreign ownership has been a factor in rising house prices in Canada, the impact of the phenomenon is “built into the cake” at this point, making movement on the issue “significant but symbolic”. .

“I think we have to distinguish between those kinds of measures that are nice to have and those that are incredibly fundamental, which are finding ways to increase density and get people to house in a different way from the one we have done since the post-war period. Two eras,” he says.

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