Homes for People
Metro Vancouver saw renewed price growth in March 2023 with modest increases at +2.7% for detached, +0.7% for apartments, and +1.7% for townhomes. Annual growth isn’t quite reflected due to strong base effects from March 2022. New listings remained 22% below the 10-year seasonal average and continue to suggest that sellers are awaiting more favourable market conditions. Despite elevated borrowing costs, March data indicates home sales are making a stronger-than-expected Spring, with 2,535 residential sales (including multifamily and land), representing a 43% decrease from last year. Across all detached, attached and apartment property types, the sales-to-active listings ratio for March 2023 is 31%. By property type, the ratio is 23% for detached homes, 37% for townhomes, and 35% for apartments.
$12 Billion Plan
British Columbia’s government unveiled a multi-billion dollar plan to tackle the province’s housing crisis, called Homes for People. With over a million people flooding into the country, well past the Federal government target, it has put a strain on critical infrastructure including housing. With only about 200K new housing completions per year, new listings at 20-year lows, and two-decade low vacancy rates, you can tell it isn’t adding up so well. The Homes for People plan involves a $4 billion investment over 3 years and $12 billion over the next decade with the goal of building thousands of new homes.
There are 4 pillars to the housing action plan:
- Unlocking more homes, faster.
- Multi-unit housing, speed-up permitting, mass timber.
- Delivering better, more affordable homes.
- Social housing, end discriminatory rental restrictions, co-op housing.
- Supporting those with the greatest housing need.
- Renter’s tax credit, close encampments, rent bank.
- Creating a housing market for people, not speculators.
- Flipping tax, short-term rental restrictions, crack-down on criminal activity.
The overhaul of municipal zoning policies is aimed at filling in the missing middle—such as townhomes, laneway homes, and multi-family units on single-family lots. This fall, they will introduce legislation that applies to many areas of the province and allows up to 4 units on a traditional single-family detached lot (or 3 depending on the size/type of lot) with additional density permitted in areas well-served by transit. A newly dedicated single-window application process will be launched to speed up the process and eliminate the need for multiple applications across ministries.
The model will focus on prioritizing housing projects such as Indigenous-led projects, BC Housing applications and multiple-unit developments. “This means no more long zoning processes just to build a duplex, a triplex or a row home. Without more of these types of homes, we risk pushing more of our next generation out of this province,” said Eby. Next year, homeowners will be able to access a forgivable loan of 50% of the cost of renovations, up to a maximum of $40,000 over five years, if they are willing to rent those secondary suites at below market rate for at least five years.
B.C. Premier David Eby insisted the province is on track with its housing plan, but pundits argue the statistics tell a different story and show that the government’s reliance on the market to create the necessary housing has only made real estate more expensive. A province-wide missing-middle policy may have the unintended effects of creating a new type of real estate developer, the “homeowner developer” who will be able to build a triplex in their backyard without a lengthy rezoning process. The upzoning policy could actually increase speculation as single-family lots could rise in value based on their development potential.
Amendments to the Foreign Homebuyers Ban
The Canadian government announced amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Act on March 27th, 2023, shortly after it came into effect at the beginning of the year. Although temporary, the government’s attempt to “improve affordability” was perhaps not well thought out. There were unintended consequences such as development companies that are partly foreign-owned or relied on foreign capital, unable to proceed with purpose-built projects. The Act also had a negative impact on Real Estate Investment Trusts (REITs)—by far the most capable and motivated potential builders of affordable units.
The Federal government’s hasty decision-making led to an abrupt fallout from the legislation, as a record number of immigrants entered Canada last year. There is a desperation for more housing development in every corner of the country. The ban, which was supposed to last two years, wasn’t even necessary in the first place. Statistically, it was only a tiny percentage of foreign buyers purchasing resale homes. Amendments to the regulation:
- Exception for development purposes.
- This exception allows non-Canadians to purchase residential property for the purpose of development. The amendments also extend the exception currently applicable to publicly traded corporations under the Act, to publicly traded entities formed under the laws of Canada or a province, and controlled by a non-Canadian.
- The prohibition no longer applies to vacant land.
- Repealing section 3(2) of the regulations, so the prohibition does not apply to all lands zoned for residential and mixed-use. Vacant land zoned for residential and mixed-use can now be purchased by non-Canadians and used for any purpose by the purchaser, including residential development.
- More work permit holders are eligible to purchase a home.
- The amendments allow those who hold a work permit or are authorized to work in Canada under the Immigration and Refugee Protection Regulations to purchase residential property. Work permit holders are eligible if they have 183 days or more of validity remaining on their work permit or work authorization at the time of purchase and they have not purchased more than one residential property. The current provisions on tax filings and previous work experience in Canada are being repealed.
- Increase in the corporation foreign control threshold.
- For the purposes of the Prohibition, with regards to privately held corporations or privately held entities formed under the laws of Canada or a province and controlled by a non-Canadian, the control threshold has increased from 3%to 10%. This aligns with the _Underused Housing Tax Ac_t’s definition of “specified Canadian Corporation”.
First Home Savings Account
The Government has confirmed that as of April 1, 2023, financial institutions will have the ability to start offering the new Tax-Free First Home Savings Account (FHSA).
Program Highlights
- [UPDATED] The FHSA and HBP (Home Buyers’ Plan – RRSP down payment program for First Time Buyers) can now be combined on the same qualifying purchase.
- Applicant must be a resident of Canada and between the age of 18 and 71 years old.
- Must be a first-time home buyer, defined as someone who has not owned a home in which they have lived at any time during the calendar year before the account is opened, or at any time in the preceding four years.
- The owner of the plan would have the ability to hold a broad range of investments, just like an RRSP or TFSA.
- Unlike an RRSP, contributions made in the first 60 days of a calendar year cannot be applied to the previous tax year.
- Homebuyers have up to 15 years from their first contribution or until their 71st birthday, whichever comes first, to use the funds to purchase a home.
- Homebuyers can carry forward unused portions of their annual contribution (up to max. $8,000) to subsequent years, as long as they do not exceed the lifetime limit of $40,000.
- Funds that are not withdrawn from the plan to purchase a home can be transferred to an RRSP or RRIF on a tax-free basis.
- Non-qualified withdrawals from the plan are permitted but will be subject to a withholding tax, just as they apply to taxable RRSP withdrawals.