Liberal Party Leader Justin Trudeau is promising an expansion of the First-Time Home Buyer Incentive (FTHBI) program and the implementation of a national vacancy tax on homes to help curb foreign speculation in the housing market if the Liberals are elected in October.
The pledge expands the FTHBI program — first announced in this year’s budget — to cover home values up to $789,000, replacing the current cap of $480,000 in the hot housing markets of the Greater Toronto, Vancouver and Victoria, B.C. The proposed expansion of the program does not apply to areas outside of those three markets.
Speaking at a campaign event in Victoria, Trudeau also promised a one per cent annual vacancy tax to be levied on non-resident, non-Canadian owners.
“We are sending a message that Canada is not a place for those who wish to speculate in the housing market,” Trudeau told reporters. “I want to make it clear though that Canadians living abroad or permanent residents in Canada will not be affected in any way.”
The FTHBI program is aimed at first-time homebuyers who earn up to $120,000 a year and is designed to lower monthly mortgage payments without boosting costs on a down payment. Under the program, the Canada Mortgage and Housing Corporation (CMHC) offers 10 per cent toward the down payment on a new home and five per cent on resale homes, interest-free.
Under the previous arrangement, a first-time buyer qualified for assistance if the total value of the mortgage did not surpass $480,000. Thursday’s announcement would see that increased to $789,000. Previous government estimates have said the program could save buyers up to $286 per month – or more than $3,430 per year – in mortgage payments on a $500,000 house.
“Owning a house should be a realistic life goal,” Trudeau said. “Young people hoping to buy a first home, as their parents did a generation ago, are facing a tough housing market.”
Trudeau also highlighted the Liberals National Housing Strategy, a 10-year, $55-billion plan to help more than 600,000 Canadians find affordable places to live and help build nearly 140,000 more housing units by 2028.
The program has come under scrutiny in the past from housing experts who say it’s not necessarily a good deal for some homebuyers. Calculations done by Global News suggest buyers may actually have to pay back more than they would save through the program.
David Hulchanski, a professor of housing and community development at the University of Toronto, said the Liberals announcement is not going to be very helpful for people living in Canada’s most expensive markets.
“In those expensive housing markets that doesn’t get you very much,” Hulchanski said.
The average home price in the Greater Toronto Area was $792,611 in August, according to the Toronto Real Estate Board. The average price in Vancouver last month was $1.2 million and $847,300 in Victoria, according to the local real estate boards.
Hulchanski said when the program was first unveiled in the budget, many experts noted the $500,000 limit would exclude Canada’s most expensive markets.
“My question is why did they not include those three housing markets in March?” he said. “It’s partisan politics. So they could have something to announce [during the election].”
Meanwhile, the Canadian Real Estate Association welcomed the today’s promise from the Liberals saying it gives “tangible support for millennials, new Canadians and other first-time buyers.”
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A spokesperson for Conservative leader Andrew Scheer criticized the announcement saying the Liberals have failed to provide details on how many people will actually benefit from the incentive.
“Justin Trudeau has never been able to quantify the number of Canadians who will actually benefit from the First-Time Home Buyers Incentive and he still can’t,” said Simon Jeffries in an email. “Justin Trudeau has imposed the heavy-handed mortgage stress test, making it harder for families to afford the home they want.”
“Scheer has the plan to lower taxes and leave more money in the pockets of hardworking families to make it easier to save up for a down payment.”
Jeffries said the Conservatives will address housing costs later in the campaign.
A spokesperson for the NDP said the Trudeau government had four years to address the housing crisis and failed.
“It’s hard to believe his sincerity on this now that election time has come back around,” Melanie Richer said in an email. “Even with the First time Homebuyers Incentive, he only got it started this week and now he wants Canadians to believe he wants to expand it now.
Richer said NDP leader Jagmeet Singh has laid out a plan – including a foreign buyer’s tax – that ends speculation fuelling high housing prices and has committed to create 500,000 affordable housing units over the next ten years.
Global News reached out to Green Party for comment, but did not receive a response.