Canada’s New Housing Plan Won’t Help, But Slowing Immigration Will: BMO

Canada just announced billions in new measures to correct the housing issues it created. Last night the Government of Canada (GoC) released its latest budget, including billions in spending on new housing stimulus. BMO provided a list of the recent changes, noting they’ll have a limited impact, given most of the measures are demand stimulus. However, they do see affordability improving soon—due to new limits on immigration. They reiterated that Canada doesn’t have a problem building, it has a problem with policy stimulating demand. 

New Measures Mostly Fluff, Immigration To Do Most of The Work

In the days leading up the budget, measures trickle out in the preceding days. This one was no different, just revealing more details on some of the programs. Those programs were largely already broken down by the bank. They believe “… the market impact should be minimal,” explained Douglas Porter, Chief Economist at BMO. 

Adding, “At the same time, caps on nonpermanent residents should carve population growth down to 1% or lower in the years ahead, which will likely have the biggest impact at the end of the day. After all, housing has been hit by massive demand shocks, not a lack of building.” 

The only surprise was not directly related to housing, but will impact quite a few investors/recreational users. The capital gains inclusion rate will rise from 50% to 75% after the first $250k. 

“…[The increased inclusion rate] will impact those planning to sell valuable properties with much lower cost bases,” he explains. 

Recently Announced Housing Policy Measures In The Latest Budget

30-Year Amortizations For First-Time Buyers

As previously discussed, lenders will be able to offer 30-year amortizations on mortgages to first-time buyers when purchasing new construction. This is primarily a policy to preserve prices by helping first-time buyer budgets rise to absorb stagnant inventory, preventing the need for developers/investors to cut prices on the units. Porter feels this will have a limited impact due to the small size of the market. 

“In general though, this is a measure that stokes demand at a time of excess demand, and ultimately does little to improve affordability once prices adjust,” he explains. 

Home Buyers’ Plan RRSP Limit 

First-time home buyers will be able to borrow a lot more money from their RRSPs. The limit that can be borrowed for a downpayment was increased from $35,000 to $60,000. The repayment period has also been extended by 3 years.  

Renters Bill of Rights and Tenant Protection Fund 

This is a group of new measures, the more interesting being a National standard lease agreement. The bank points to this as an odd decision, since it’s a provincially regulated issue. 

A new Tenant Protection Fund will also seek to provide legal assistance.  

He sees the measures potentially acting as a “deck stacked against landlords,” helping to prevent more quality rental supply. He cites increasing incentives such as taxes, landlord-tenant board backlogs, non-payment risk, and market conditions.” 

Accelerated CCA  

Developers of new purpose-built rentals will be able to accelerate the period for writing off CCA. In addition, student rentals—often considered the most profitable segment, will no longer be subject to HST.  

More Mortgage Bonds

The mortgage bond limit is being raised a whopping 50% to $60 billion annually. This is a disaster waiting to happen but requires a deep dive. 

Low Interest Loans For Secondary Suites

The government will be borrowing to provide homeowners with subsidized loans to add secondary suites to their homes. More details are being added this fall.

Housing Accelerator Fund 

Canada’s recently announced Housing Accelerator Fund will get more funding. They’ll also be tying transit funding to densification along transit corridors.  

Standardized Low-Rise Catalog 

Releasing standard housing designs to speed up permitting for low rise housing. Unclear how this would work, since it would largely override provincial and municipal policies.   

Income Verification For Mortgages 

The CRA will be providing lenders with a verification portal, helping to reduce fraud. 

Ban Corporate Ownership of Single-Family Homes 

Large institutions will be banned from purchasing single-family homes, though they provided no real details. It’s hard to see how this would be executed considering how the development process works in major cities. 

We’ll be taking more detailed dives into these measures over the next few weeks.

17 Comments

COMMENT POLICY:

We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.

Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.

  • Lou Chao 1 month ago

    They made a pathetic attempt to stimulate demand and raise prices… again.

    • Lauren Maddox 1 month ago

      Mugger convinces victim this time they’ll help if they hand over their wallet just one last time.

  • Mark Cohen 1 month ago

    LMAO! The Libs basically plagiarized Punwasi’s mayoral platform, and changed the stakeholder from the public to their donors. Some of the points so closely resemble his plan, I’m kind of curious if they repeated the same words.

    • Ethan Wu 1 month ago

      That’s too funny. Makes sense why they announced Federal policies that are provincial and municipal boundaries. Canada just elected Fraser to be mayor of every city.

      So what’s the purpose of municipal governments at this point? The Federal government is tying every policy to regional governance, so it doesn’t matter who you elect.

      • Trader Jim 1 month ago

        Intentionally creeping into other jurisdictional challenges so voters are distracted by the looting they’re doing in their own area.

        The gov is borrowing on behalf of developers, giving us the higher loan rate to borrow, but then telling the public the stuff they should be financing (like large infrastructure projects), can’t be financed without outside capital.

      • Jolene Higgins 1 month ago

        They are trying to bypass the provinces to avoid the headbutting…

  • Curtis C 1 month ago

    Slowing down a certain form of behaviour, definately will help, the pathetic Liberal Organized Crime Ponzi Scheme.

    And it’s everyone’s decision to be a Safe Responsible Citizen.

  • TR 1 month ago

    How do you stop single-family home ownership from institutions? How are we supposed to create land assemblies to actually turn into more housing?

    Highlights the BS affordability narrative on zoning. They know mom & pop aren’t moving out to put up a 4-plex, they just wanted an adjustment on land values to reinforce a price floor. Now for people that turn 6-8 homes into dozens with a tower, they’re going to get hurdles.

    • Trader Jim 1 month ago

      On the upside, they’re never going to pass it. It’s like the foreign buyer ban or beneficial ownership. Promise they’re doing it so their voters don’t think they’re negligent, then make loopholes and roll it back so no one is impacted.

  • Ron Bruce 1 month ago

    Canada’s New Housing Plan Won’t Help, But Slowing Immigration Will:
    You would think the PM and the Minister of Finance could make the calculation. Now, it is a generational problem that wouldn’t be fixed even if another Federal Party is elected. Tweedle Dee and Tweedle Dumb keep digging a financial hole that the next generation won’t escape from.

  • M.Bury 1 month ago

    Can you check the 75% cap gain inclusion rate? I’m reading in other places that it’s actually 67%.

    • TeriB 1 month ago

      You’re correct. Expected better from this site.

  • Todd 1 month ago

    More money for property owners to become more richer just to charge more rent to the peasants.

  • Bryan 1 month ago

    It’s ironic because I was removed as a commenter 4 years ago for saying the LPC immigration plan was one of the main reasons for a housing crisis in Canada.

    • Yusef 1 month ago

      Man comments he’s not allowed to comment due to his hot take. No one’s dumb enough to not realize they’re literally reading your comment.

  • Nick Parker 1 month ago

    (Renters Bill of Rights and Tenant Protection Fund being a) ‘”deck stacked against landlords,” helping to prevent more quality rental supply”‘? Prevent?

  • Buzz Free 1 month ago

    Is everyone blind or is it just me who sees that the problem with housing is related to to one main thing: immigration, immigration immigration.
    Don’t get me wrong I’m not some right-wing, xenophobe who is against all newcomers. A reasonable amount of new Canadians is a healthy thing especially if they are coming here to make a better life for themselves through hard work and a positive contribution. But the number and profile of the immigrants is the problem. It seems to me that many of the newcomers are very rich and are using Canada as a placeholder whilst they continue their business in their countries of origin. This adds very little to our economy whilst draining our social services especially for free health care.
    The practice of demolishing homes in prime areas of the lower mainland for rich buyers does nothing to increase the housing supply whilst draining the supply of building materials and increasing the construction costs for new housing.
    The measures undertaken by our governments are just window dressing aimed at gaining votes. If they really wanted to do something they would drastically limit and be more selective about immigration.
    The crisis is negatively affecting many sectors of our economy. The retail sector is in terminal decline because of reduced disposable income as we are spending most of our salaries on mortgages and rent. The USA with much lower housing costs is in far better shape and this is quite obvious to me when visiting.
    Canada used to have a similar living standard as the USA but the reliance on real estate as an economic engine has resulted in a housing bubble of epic proportions. Once the housing bubble unravels things are going to get very difficult but the policies presently being enacted are just exacerbating the inevitable.

Comments are closed.