Homeowners benefit from budget hat trick

by Peter Squire

The Winnipeg Jets and their devoted fans celebrated a playoff berth last Saturday, with Kyle Connors getting his first NHL hat trick to lead them to victory over their 2018 playoff archrival, the Nashville Predators. You can also say March was a month when another hat trick was in play — with three government budgets delivered and passed. This is a rare occurrence, and while no hats were being thrown into the street to celebrate, millennials hoping to enter homeownership had many reasons to be optimistic.

Let’s start with the City of Winnipeg budget. Despite some challenges — including a disputed residential street renewal payment of $40 million that had been anticipated from the province of Manitoba which did not get resolved — Winnipeg City Council passed the operating and capital budget without increasing it beyond Mayor Brian Bowman’s four-year election pledge of a 2.33% increase annually. 

Hard choices have to be made and you cannot please everyone. All of the property tax increase has been dedicated to infrastructure as per last year’s civic budget. There was no frontage levy increase, nor any new fees or charges this year. The water and dividend rate was decreased from 12 to 11 percent. Impact fees were kept at the rate of construction inflation at 3.5% and revenue derived from them is not being used as a funding source in this year’s budget. Currently, this impact fee on new residential development in emerging areas of Winnipeg is under a legal challenge.

Something to note — as part of the City of Winnipeg’s efforts to keep property taxes affordable, while continuing to make infrastructure and frontline services a top priority — is the six percent increase in the tax supported transit budget. Among many new investments included, such as bus operator safety shields, is the purchase of 34 new buses, with some dedicated to the opening of Stage 2 of the Southwest Rapid Transitway.

An interesting byproduct of this year’s budget is the allocation of $100,000 to develop a strategic plan, with all members of city council in preparation and support of moving to a multi-year planning and budget initiative which will be in place for 2020. At the special city council budget approval meeting, Finance Chair Scott Gillingham talked about how this new process will get all councillors to look more long-term at city-wide priorities, and that part and parcel of this plan is to direct the public service to report back to council on analysis of  the City of Winnipeg’s core service responsibilities.

At the provincial level, a big move was the election pledge commitment to reduce the PST from eight to seven per cent on July 1, 2019. Making purchases more affordable helps everyone, but this can be especially beneficial to millennials and younger Manitobans who are still facing major life purchases, such as a home and all of the ancillary expenditures that go with it.

Another significant direction in the 2019 provincial budget was the reduction of the deficit to $360 million. Moving to eliminate it and balance the budget will put the Province of Manitoba in a much better position to bring in more financial measures to make life increasingly affordable for Manitobans. One such measure at the top of REALTORS® wish list is to provide meaningful land transfer tax relief, since the tax that was introduced in 1987 has never been indexed to reflect much higher house prices. Other provinces which levy land transfer taxes have taken positive steps in this regard, with Quebec in 2018 taking a page out of the federal government’s playbook and offering first-time homebuyers a similar $750 tax credit.

Speaking of first-time homebuyers, the provincial budget is creating a new $2-million home ownership program to provide them with renovation assistance. There will also be some money allocated for building new homes for eligible clients.

The most recent budget tabled was from the federal government on March 19. Some media commentators went so far as to call it a “housing budget” given all the attention and press spent on millennials’ desire for home ownership and their growing concern about being able to afford one. Clearly, this message was not lost on the federal government, although despite that, they did not adjust the federal stress test which has disproportionately affected first-time buyers, and which has had many real estate and housing experts pointing out how it has been too harsh in its application and is affecting the economy as a whole.

However, to the federal government’s credit, they did increase the Home Buyers’ Plan (HBP) withdrawal limit from $25,000 to $35,000. The HBP has already helped nearly 3 million first-time buyers achieve home ownership since its inception in 1992, and it has now been opened up for the first time to Canadians experiencing a breakdown in marriage or common-law partnership.

The other major development — which caught most people by surprise — is the First-time Home Buyer Incentive. This is a targeted program administered by CMHC to help Canadians lower their monthly payments by allowing the federal government to take a shared equity position in their mortgage. The incentive will provide 5% in equity to existing homes, and 10% for newly constructed homes. Despite all of the details that still need to be worked out with this new program, September 2019 is the target date for it to become operational.

One very positive aspect of this new program relating to our local market is that the majority of Winnipeg Metro Region MLS® sale prices fall within the ceiling price established for it. A household income can be up to $120,000, with the insured mortgage including the CMHC incentive not exceeding four times the buyers’ income.

Another theme on housing included in this federal budget is increasing housing supply. More money has been allocated to expanding the Rental Construction Finance Initiative which will create more rental units. WinnipegREALTORS® has been a strong advocate of building more rental units to create a balanced housing market. Winnipeg’s rental vacancy rate has improved over recent years to sit around 3 percent.

That all three budgets had homeownership and housing affordability in mind was a rarely seen government hat trick, as this certainly has not always been the case. REALTORS® welcome that our elected representatives are recognizing how important home ownership is to Canadians, and we tip our hats as they take these positive steps to make the dream of homeownership a reality.

Peter Squire is WinnipegREALTORS®’, Vice President, External Relations & Market Intelligence.