What is the Federal Budget?
Every year the Department of Finance is tasked with balancing the revenue and expenses of the Government of Canada. As part of this process, the Department analyzes different sectors of the economy to create an annual fiscal plan. The Budget provides the economic “blueprint” as to how the Government will respond to the development in each sector which ultimately affects the interests of all Canadians.
Why is it Important?
While any budget is necessary to avoid financial trouble, the Budget of 2022 is of particular importance as it is the first budget since the last federal election and the first budget since a “deal” reached between the Liberals and NDP. Of much importance to many Canadians is how the 2022 Budget considers and responds to the concern of housing affordability. Here are five considerations from the 2022 Budget that may make housing more affordable moving forward:
Supporting Rent-to-Own Projects
While some Canadians prefer to rent as a matter of choice, other Canadians are concerned that they will not be able to own a home. This worry has become more widespread when Canadians are assessing their own personal budgets in relation to housing prices, which have held strong in the first (1st) quarter of 2022 despite lower sales records than 2021.
The 2022 Budget proposes to support home ownership by allocating at least $200 million in support under the current Affordable Housing Innovation Fund. At least $100 million of that support is to encourage and help facilitate non-profits, co-ops, developers, and rent-to-own companies build new rent-to-own units.
Multigenerational Home Renovation Tax Credit
The 2022 Budget introduces a tax credit to offset the cost of making improvements to homes for multigenerational family members who share a home. Up to $7,500.00 in support is available starting in 2023 for projects such as constructing a secondary suite for a senior or an adult with a disability. Families may be able to claim approximately 15% in eligible renovation and construction costs up to $50,000.00.
Tax-Free First Home Savings Tax Credit
As some Canadians are finding it difficult to save for a down payment, the 2022 Budget has introduced the concept of a specialized Tax-Free First Home Savings Tax Account. This enables prospective first-time home purchasers to save up to $40,000.00 and be credited (up to $8,000.00 for a filing year) when filing annual income tax statements. Like other registered investments, the idea is that any accrued investment income in the account would be non-taxable. Deposits and Withdrawals would also be tax-free.
First-Time Home Buyers’ Tax Credit
Persons who purchased homes on or after January 1, 2022, may benefit from the proposed changes to the First-Time Home Buyers’ Tax Credit. The credit is to be doubled up to $10,000.00 for eligible persons which in turn would provide support of up to $1,500.00. As a non-refundable tax credit, it encourages persons to enter the real estate market by making home buying more affordable. You may recall that it was introduced as part of ‘Canada’s Economic Action Plan’ to assist Canadians in purchasing their first home. It is designed to help recover closing costs such as legal expenses, inspections, and land transfer tax. The Budget also announces an extension of the First-Time Home Buyer Incentive to March 31, 2025.
Who can Participate in the Real Estate Market Moving Forward? It Depends
In a move to “throttle” who can participate in the Canadian real estate market, the 2022 Budget announces restrictions on foreign investors who are not citizens or permanent residents from acquiring non-recreational, residential property in Canada for a period of two (2) years. Certain exceptions apply including, but not limited to, refugees, international students, and persons with work permits as a few examples.
For anyone considering changing their housing situation, the 2022 Budget offers insight as to how the Government of Canada plans to assist and respond to the rapidly changing market with enhanced measures that will have national impact.
This blog post was written by Brandon Doughty, a member of the Real Estate and Wills and Estates teams. He can be reached at 613-369-0364 or at firstname.lastname@example.org.