by Peter Squire
REALTORS® from across the nation converged on Ottawa this week for Political Action Committee (PAC) Days.
“PAC Days is the association’s chance to get representatives of 125,000 members across the country to Ottawa to speak to its MPs about issues that matter to Canadians and housing,” said Tim Ayres, chair of the Federal Affairs Committee and a director of the Canadian Real Estate Association (CREA).
He said affordability of homeownership is a growing concern for Canadians.
This week a record number of over 300 Realtors met with their constituent MPs specifically on the Home Buyers’ Plan, or HBP as it is commonly referred to since its inception in 1992. It has helped close to three-million Canadians — first-time buyers, those haven’t owned a home for five years or the disabled —have the opportunity to become homeowners by accessing their RRSPs to help make a down payment on a home.
Building on what the Liberal government promised in its 2015 election platform, CREA this year is asking all MPs to support modernizing the HBP to enable its wider application and use in sudden life-changing circumstances. Examples include job relocation, the death of a spouse, marital breakdown or the decision to accommodate an elderly relative.
Extending the HBP is a fiscally conscious way to ensure affordable access to safe and stable housing in Canada. It is important to note the HBP effectively amounts to a zero-interest self-loan because it allows Canadians to borrow from their own savings.
The majority of Canadians, who have taken advantage of the HBP since 1992, pay the withdrawn amount, according to the government’s 15-year repayment schedule. For those that don’t, Canada Revenue Agency counts it towards their taxable income based on the percentage required for that one tax year.
Given how house prices have increased in many local housing markets in the last few years and that it’s more difficult for a first-time buyer to come up with the necessary down payment to buy and afford a home, Realtors meeting with their MPs also asked them to consider another proposal. CREA recommends that the HBP be expanded to allow for the intergenerational use of RRSP funds by one child or more for the purchase of a home. The accumulated savings of a parent (up to the current maximum limit of $25,000 per individual) could be accessed through a loan, and reimbursed to the parents’ RRSP in accordance with applicable conditions.
According to Canada Mortgage and Housing Corporation (CMHC), nearly one-in-five first-time homebuyers receive a loan or gift from a family member to purchase a home. Offering parents a program to assist their children with the purchase of a home, would help many first-time homebuyers enter the market. It would also reduce the amount borrowed and, therefore, limit risk to the lender.
With recently announced mortgage tightening measures and interest rate increases homeownership is becoming less attainable. Therefore, making the very successful HBP more accessible makes sense. Either of the above recommendations do not require any additional funding or the development of new regulations.
Besides the HBP, CREA and WinnipegREALTORS® have both made submissions to the federal government with respect to a proposal to extend a mortgage qualifying stress test on uninsured mortgages and on the recent federal government proposed tax changes to private corporations.
The changes were made to the mortgage stress test, despite Realtors associations and other groups requesting no more changes be made before the impact of previous mortgage tightening rules on the housing market.
Canada’s top banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), confirmed that, as of January 1, 2018, a new stress test will be applied to federally-regulated financial institutions on uninsured mortgages. The stress test to qualify for an uninsured mortgage will be either the five-year average posted rate or two percentage points higher than what the mortgagee was able to negotiate, whichever is higher. This new stress test will not apply to mortgage renewals.
CREA will continue to assess the impact of all these mortgage tightening changes, including this latest move by OSFI.
There has been some retrenchmentby the federal government on the proposed tax changes to private corporations, but it’s too early to tell what will end up being implemented. CREA has made some very good points on how the federal government can make changes to the current proposal without hurting small business. One aspect of the debate is how the tax proposals may discourage small business from continuing to be an engine of job growth for our country.
PAC Days also included a number of interesting presentations to Realtors so that they better understand national issues of significance to homeowners. One example is the plan to make cannibas legal in Canada on July 1, 2018, as per Bill C-45.
CREA does have several concerns about the implications and consequences of personal cultivation for homes and homeowners. There are health and safety concerns, as well as questions regarding homeowner rights, enhanced disclosure requirements, effective oversight and enforcement of home grow-operations.
CREA is asking the federal government to include the requirement for proper disclosure and remediation standards surrounding personal cultivation in residences in the legislation.
All in all, Realtors are working hard to make homeownership more accessible, safer and more secure for Canadians.