Prime Minister Justin Trudeau and his Liberal government unveiled the $480.5 billion federal budget for 2024. Inside the 400-page-plus budget includes more than $52 billion in new spending over five years that courts a wide array of voters heading into next year’s election. While the budgetary blueprint proposes various support payments, tax increases, and finance programs for Indigenous communities, Ottawa is also looking to tackle the housing file with nearly $9 billion in new spending.

It had been widely expected that the prime minister and his team would dedicate a large portion of the federal budget to housing. Heading into the official unveiling, the Trudeau government showcased multiple components of Canada’s Housing Plan to bolster supply, speed up construction, and restore housing affordability.

Days after the Parliamentary Budget Officer projected that the country would need more than three million homes to address the national shortage, what did Trudeau and the Grits offer Canadians?

“Fairness for every generation means making housing affordable for every generation. For generations, one of the foundational promises of Canada’s middle-class dream was that if you found a good job, worked hard, and saved money, you could afford a home. For today’s young adults, this promise is under threat,” the government said.

“The government is taking action to meet this moment and build housing at a pace and scale not seen in generations. We did it when soldiers returned home from the Second World War, and we can build homes like that again. And we can make sure that Canadians at every age can find an affordable home.”

But how will this be done? Let’s look at what the 2024 federal government officially proposes for the housing sector.

Property Transformations

A vital component of the plan is converting various properties into homes. For instance, the government plans to spend $1.1 billion over ten years to convert 50 per cent of federal offices into homes. Ottawa also intends to construct houses on Canada Post land, explaining that the roughly 1,700 Canada Post offices nationwide can be used to build new homes while keeping the postal service intact. Additionally, Trudeau wants to assess redeveloping buildings and properties on national defence lands for civilian and military use.

Apartment Construction Loans

This year’s federal budget suggests providing an extra $15 billion to the Apartment Construction Loan program. The 2017 program was initially designed to build at least 30,000 new rental apartments throughout major urban centres, rural areas, and small communities. The additional funds could inject approximately 131,000 new apartments into the Canadian real estate market within the next eight years.

30-Year Amortization Period

For months, industry leaders, market watchers, and economists have called for increasing the maximum amortization period to 30 years. Canadians might have heeded these suggestions, proposing to adjust mortgage insurance regulations to allow for 30-year mortgage amortization for first-time homebuyers purchasing newly built homes. It would go into effect on August 1, 2024.

Financing Options for Secondary Suites

The budget revealed the Canada Secondary Suite Program, which will be managed by the Canada Mortgage and Housing Corporation (CMHC). The housing measure offers homeowners up to $40,000 in low-interest loans to enable the creation of a secondary suite in their homes.

Underused Public Lands

According to the latest national housing strategy, the federal government will lease underused public lands to developers at reduced costs to build affordable housing. Officials say that the land set aside for development is presently underused and could consist of schools with low enrollment, abandoned industrial parks, and places where government entities became defunct.

Home Buyers’ Plan RRSP Withdrawal Limit

For many Canadians, putting together a down payment for a home can be challenging. In recent years, first-time homebuyers were permitted to tap into their Register Retirement Savings Plan (RRSP) to purchase or build a qualifying home. The tax-free withdrawal limit was $35,000 for individuals and $70,000 for couples. The budget boosts the withdrawal limit to $60,000 for individuals and $120,000 for couples.

Halal Mortgages

According to the federal budget, Ottawa will consider expanding access to “alternative financing products,” including Halal mortgages. Islam believes charging interest and making gains is unjust as they are a form of usury. While some financial institutions provide mortgages that comply with Islamic law, none of the country’s five big banks offer them. Experts purport that these lending instruments might not be interest-free but would possess conventional fees that replace the interest.

Addressing the Labour Shortage

Canada’s housing market is facing a labour shortage, which has resulted in higher costs and delayed completions over the last couple of years. Budget 2024 allocates $50 million to accelerate The Foreign Credential Recognition program, which supports skilled trades workers in participating in the Canadian workforce without further delays. In addition, the budget offers $100 million for training in the skilled trades, apprenticeship opportunities, and promoting recruitment of future skilled trades workers.

Mixed Reactions on the 2024 Federal Budget

The budget framework’s housing measures ignited mixed reactions.

Some financial experts asserted that expanding RRSP withdrawals and increasing amortizations to 30 years may bolster competition in the short term, potentially exacerbating affordability problems.

“Allowing first-time buyers to make larger RRSP withdrawals for down payments, or secure 30-year amortizations when they buy new construction, will increase buying power and bring more people to the market at a time when there’s already a shortage of properties to bid on,” said Clay Jarvis, a NerdWallet personal finance author. “Competition may not increase by much, but we don’t need it to increase at all.”

Jason Mercer, the chief market analyst at the Toronto Regional Real Estate Board (TRREB), noted that the housing strategy could stimulate demand when shortages are prevalent.

“We have a housing supply deficit that’s built up over the last decade, but even more so now, we’re going to continue to see demand increase, not only as borrowing costs start to trend lower in the second half of this year, but as the population continues to grow,” Mercer said.

The Ontario Real Estate Association (OREA) was enthusiastic about seeing the return of 30-year amortization mortgages. However, OREA CEO Tim Hudak believes it should apply to everyone and all home types.

“As families look for a great place to lay down their roots, their budget shouldn’t be contingent on whether they’re purchasing a newly built or pre-owned home. In the middle of a housing affordability crisis, many Ontario families, not just first-time homebuyers, would benefit from the relief of 30-year amortizations on their mortgages,” he stated.

Others purported, including Canadian Home Builders’ Association (CHBA) CEO Kevin Lee, that these federal tools can help diminish the housing supply deficit.

“CHBA and our members are very pleased to see the federal budget measures that will help the sector respond to the government’s goal of doubling housing starts to overcome the housing supply deficit,” he said in a statement. “CHBA has long called for policies to assist those who dream of home ownership but have found it out of reach. Today’s budget will go a long way to help unlock the door to home ownership.”

In the end, Finance Minister Chrystia Freeland believes the federal government will help solve “structural issues that are behind the high cost of essentials” and are “a key focus of Budget 2024.”

Source: https://blog.remax.ca/2024-federal-budget-key-takeaways-for-housing/