One of the biggest news stories this fall was the federal election. It was a high-stakes event coming at a critical time in the year. As Canadians had spent over a year coping with the impact of the COVID-19 pandemic, it was to be expected that the election would make a big splash, and it did not disappoint!
For the major parties, the most significant topics in their platform were pandemic/economic recovery and the housing market. Most Canadians are supremely aware that we are currently in a housing crisis, and our current competitive seller’s market is just one indication of the current climate that Canadian home buyers and sellers must contend with.
Now that the dust has settled from this fall’s election. Let’s take a closer look at the Liberal housing strategy and what it means for Canadians.
Anti-Flipping Tax
The Liberal Party housing policy includes provisions for an anti-flipping tax. This means that they will reduce incentives for house flipping and require that residential properties be held for at least 12 months before selling.
According to the Liberals, this policy will “reduce speculative demand in the marketplace” and will help to cool some of the excessive price growth that we have experienced in recent quarters.
For those looking to buy a house to flip, this means you will need to look at your long-term strategy and plan to hold onto the property for a longer period of time before selling. However, the tax won’t apply in specific circumstances such as life-changing issues including pregnancy, death, employment, disability, or divorce.
A Ban on Foreign Nationals Buying Property
Something that all parties seemed to agree on was the status of foreign nationals owning property in Canada. The Liberal housing policy proposed a temporary ban on new foreign ownership to help give Canadians better access to the limited inventory that is currently available.
This policy is a temporary strategy that will last for the next two years. Although there are several caveats to this policy, the Liberals hope to work together on all levels of government to better regulate foreign buyers in the Canadian market.
Double the First-Time Homebuyer’s Tax Credit
The First-Time Home Buyers Tax Credit is a significant benefit for Canadians entering the real estate market. The Liberal housing strategy aims to double the credit from $5,000 to $10,000. This credit can help with some of the unexpected costs of buying a home such as legal fees, land transfer tax, home inspections, and other closing costs.
Introduce a Buyer’s Bill of Rights
The Liberal Party housing policy also includes plans to implement a “Home Buyer’s Bill of Rights.” The main purpose of this is to help protect buyers and encourage absolute transparency in the housing market. Some of the most notable items on this new bill of rights include:
- A ban on blind bidding
- Establishment of a legal right to a home inspection
- Requiring real estate agents to disclose when they represent both the buyer and seller in a real estate transaction
- Requiring transparency of the history of recent house sale prices
- Ensuring that mortgage lenders act in your best interest and give at least 6 months of mortgage deferrals in the case of a job loss
This bill of rights will also have provisions to protect renters including a ban on “renovictions” where landlords might try to unfairly increase the rent of a home over and above the allowed amount.
The COVID-19 pandemic brought upon many changes for Canadians. Read some of our COVID-19-related housing blogs here:
Rent-to-Own
One of the biggest hurdles for renters hoping to enter the housing market is saving for a downpayment. The Liberal housing strategy plans to help renters by implementing a rent-to-own program that plans to scale up rent-to-own projects. This model requires an individual to commit to renting a property for a reduced price for a period of time with the option to buy it at a pre-determined price before the end of the lease.
Tax-Free First Home Savings Account
Under the Liberal housing policy, they will enact a tax-free First Home Savings Account in an effort to help Canadians save for a downpayment faster. This account is designed for Canadians under the age of 40 and allows them to combine the benefits of an RRSP and TFSA.
How it works is that the plan will allow Canadians to save up to $40,000 towards their first home and to withdraw it tax-free. Unlike using an RRSP to fund a downpayment, there is no requirement to repay.
Any leftover or unused funds in the account after the individual turns 40 will revert back to RRSP.
Michael was recently on CHCH Morning Live speaking about the Liberal Housing Plan. Watch the segment here.
Housing Accelerator
Most housing market experts and economists insist that the only true way to combat the current housing crisis is to deal with supply issues. There are simply not enough homes available for Canadians right now. And there is a complex backlog of issues that are holding up the construction of new housing.
One of the most important aspects of the Liberal housing policy is the Housing Accelerator Fund. This is an application-based fund that will offer support to all levels of government to help grow the housing supply faster and more affordably. The goal target is 100,000 new homes by 2025.
The funding will be flexible, as some municipalities need different types of support for zoning bylaws, land purchases, infrastructure, and more. The government also plans to help cities identify unused urban land, and will require cities to use that land for housing, not sit unused waiting for private development.
The Bottom Line
Most of the Liberal party housing policy focuses on creating more equity for buyers. It’s a welcome sight in a housing market that has been greatly skewed towards sellers for a long time. Although most of these provisions are designed to help Canadians recover economically from the Pandemic and enjoy homeownership, there is some debate between experts and economists just how much of a positive impact these policies will have.
Most experts agree that the only way to improve conditions is to address supply issues, and it remains to be seen whether or not the Liberal plan is aggressive enough to have a significant effect on the current market conditions for buyers, sellers, and renters alike.
If you’re looking to make a real estate move in the current market, your best strategy is to work with an experienced Hamilton real estate agency to help navigate this competitive climate. If you have a question about buying or selling your home, call us at 1-844-484-SOLD or email us here.
