Housing Confidence and Supply

3 minute read

With Canada’s real estate market continuing to skyrocket and housing affordability questions echoing in the House of Commons almost daily, Budget 2022 is expected to include a number of housing related commitments. 

The average Canadian house price increased 20 per cent to an all-time high of $816,720 in February. While the country’s average is significantly influenced by the Vancouver and Toronto markets, even when you exclude the two most expensive housing markets from the equation, the average price of a home in Canada sits at $638,000. 

To further exacerbate the housing affordability crisis, incomes of Canadians have not kept pace with the drastic increase to housing costs, leaving the crisis to be felt in every corner of the country. It is no longer an urban-centric problem. Our rural communities have experienced some of the highest home price increases in generations. Even Atlantic Canada, once a haven for housing affordability, is also experiencing a wave of unprecedented prices. In February, Halifax house prices increased 33.5% compared to the same month a year ago. While rising interest rates may have an impact on the market, there is no question that government intervention is expected to help cool the runaway market. 

With the Liberal’s 2021 election platform including a number of significant housing related promises, they will have to decide how they will use their back to basics budget to carve out the details of their specific housing commitments.

Support targeting first time home buyers was a central theme in the Liberals’ housing commitments. The platform promised the introduction of a tax-free First Home Savings Account that would allow those under 40 to save up to $40,000 and to withdraw it tax-free for the purchase of their first home. They also promised to double the First-Time Home Buyers Tax Credit, from $5,000 to $10,000. Both commitments would be favourable for young families who have been struggling to get into the market. 

The Liberals also committed to the creation of a Home Buyers’ Bill of Rights, aimed at making the home buying process more transparent by banning the current practice of closed bidding, providing buyers with a right to a home inspection, and requiring real estate agents to disclose if they are involved in both sides of a transaction. 

Given that implementation of the Home Buyer’s Bill of Rights by the end of 2023 was outlined as a shared priority under the Liberal-NDP agreement, it is expected that the budget will pave the way for the Bill of Rights to take shape. A number of the proposed components within the Bill of Rights require cooperation and coordination with provinces and their provincial real estate regulators, leading to questions about how the federal government plans on implementing such changes in such a short timeframe. 

The platform also made ambitious commitments to increase housing supply across the country. The Liberals have set a target of 1.4 million homes to be built, preserved or revitalized by 2025-2026 and committed to the creation of the Housing Accelerator Fund, which will invest $4 billion to grow housing supply across the largest cities, with an ambitious goal of creating 100,000 new middle class homes by 2024-2025. With real estate analysts unanimously pointing to historically low inventory levels as one of the main drivers behind Canada’s inaccessible housing market, the budget is critical to advancing the government’s housing supply commitments. 

The NDP has been clear that they want to tackle the commodification and financialization of the housing market to help free up additional housing stock, and this was reinforced as a shared commitment in the Liberal-NDP agreement. The budget is likely to act on the Liberals’ pledge to eliminate quick flipping activities by requiring that residential properties be held for a minimum of 12 months to receive the principal residence tax exemption. They also committed to cracking down on foreign ownership by proposing a ban on foreign money from purchasing residential property for the next two years. 

What tools the Liberals use in their budget policy tool box to cool the market remain to be seen. What is certain is that Canadians will be expecting nothing less than a robust set of housing-related measures. Supporting Canadians looking to buy their first home while simultaneously trying to increase housing supply is a difficult balancing act for policy makers. And the stakes are high. Voters – particularly younger generations – are growing frustrated with an increasingly inaccessible housing market and are looking to the federal government for solutions.

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