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Only 2K Canadians have used First-Time Home Buyer Incentive — so axe it, experts say

Click to play video 'Understanding the new First-Time Home Buyers Incentive' Understanding the new First-Time Home Buyers Incentive
The First-Time Home Buyer Incentive comes in to effect today in an effort to make homeownership more affordable for young Canadians. We get the lowdown on the new program.

Editor’s Note: Following publication, the Canada Mortgage and Housing Corporation said it had actually approved 3,708 applications but only dispersed money to 2,061. That information was not contained in the documents tabled in the House of Commons, a fact the CMHC acknowledged. This article has been updated to reflect the additional information provided.

Only 2,000 Canadians have received the First-Time Home Buyer Incentive since it launched last fall.

And real estate experts say they hope to see it axed as a result.

READ MORE: Is the First-Time Home Buyer Incentive a good deal for homebuyers?

“This is exactly what I thought was going to happen,” said James Laird, co-founder of the mortgage comparison website RateHub.ca and president of CanWise Financial.

“It just was not well-thought-through — really just a very unattractive offer for first-time homebuyers.”

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According to documents tabled in the House of Commons last Saturday, only 4,414 Canadians applied to the shared-equity program for first-time homebuyers between Sept. 1, 2019, and Feb. 1, 2020.

Of those, just 2,061 have been approved and received funds through the shared-equity mortgage.

Following publication, a spokesperson for the Canada Mortgage Housing Corporation, which administers the program, contacted Global News to say the number of approvals is actually 3,708 during that time period, although only 2,061 have received the approved funds.

The CMHC acknowledged that it did not include that information in the documents tabled, which included only the numbers of applications and the number of approved applications in which money had been disbursed by the government.

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The program was touted as a way to help 100,000 Canadians become homeowners for the first time over the course of three years. At the current rate of 2,000 people getting the incentive over its first five months, it would take nearly two decades though to hit that target without major changes.

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A government official speaking on background said they still think the program is on track to hit its targets, noting that it takes time to get up and running.

The official said it’s likely no contracts were actually signed through the program until around November 2019 and that the expectation is more people will apply as it becomes better known.

Romana King, director of content at the real estate listing site Zolo.ca and a licensed realtor, said she’s skeptical the program will see a sudden surge of interest.

“I’m not surprised, not in the least,” she said of the low number of applications and approvals.

“Nobody really likes the idea of having the government as a partner in their homeownership, and I think that’s probably one of the biggest hurdles that this shared equity program has.”

READ MORE: Should you postpone buying a home to save for a larger down payment?

The federal program was launched on Sept. 2, just days ahead of the Sept. 11 election call.

It works by seeing the government give some first-time homebuyers an interest-free loan of between five and 10 per cent of the cost of a home.

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The idea is that this loan, which has to be paid back within 25 years or after the home is sold — with a portion of any appreciation in value going to the government — would let homebuyers take out a smaller mortgage and have lower monthly payments as a result.

The program is funded to the tune of $1.25 billion over three years with the government’s stated target being to help 100,000 Canadians become homeowners over that time period.

But the program appears to be off to a slow start.

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Between September 2019 and January 2020, there were 906 applications for a shared-equity mortgage through the federal program in Montreal and 392 approvals with funds handed out.

In Edmonton, there were 594 applications and 266 approvals with funds handed out.

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Calgary saw 370 applications and 170 approvals with funds handed out.

In the Greater Toronto Area though, there were just 116 applications and 57 approvals with funds handed out. And in Vancouver, those numbers dropped to 54 applications and just 29 approvals with funds handed out.

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King and Laird both said the early criticisms around the program appear to have weight.

Among those are the caveat that the program caps out at home prices of roughly $500,000 to $600,000 — a price nearly impossible to find in many major markets.

In Vancouver, the average price of a home is $1,298,332. In the Greater Toronto Area, the average is $832,703.

Even in areas where the prices are less astronomical, both said the underlying concern about the government owning equity in a person’s home remains a major concern.

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“It’s not the type of program that people want,” King said, pointing to a similar result in a B.C. program.

The B.C. Home Owner Mortgage and Equity Partnership Program was launched in 2016 but the government there cancelled it in 2018 after the program repeatedly missed its targets.

When it launched, the B.C. government had expected around 42,000 British Columbians to use the program over three years — instead, just 3,000 applied.

“It followed the exact same path where there was very low uptake,” said Laird, comparing the two programs. “Since the program is still flawed, I’d like to see it taken away.”

King voiced similar concerns.

She said she hopes the low uptake will prompt the federal government to re-evaluate the whole suite of measures used to try to help people buy homes, including the new mortgage stress test.

“It’s not like the government hasn’t gone back on policy that isn’t working anymore and I think that’s what we need to see,” she said. “Kill it when it no longer makes sense, which is what the B.C. government does, and look at other measures.”