Photo: James Bombales

It’s no secret that breaking into the housing market has become an insurmountable challenge for first-time buyers in some of Canada’s largest cities; as average home prices soar at a pace far beyond that of wage growth, it’s increasingly difficult for those looking to buy a property to pull together the minimum required 5 to 7.5% down payment.

To alleviate some of this pressure, the federal government offers several different programs and tools to help this buyer pool; one of the most long-established is the Home Buyers’ Plan(HBP), a tax-free way to utilize funds initially set aside for retirement for a home purchase instead.

How does the HBP work?

First introduced in 1992, the HBP allows individuals to pull up to $35,000 of their savings from their Registered Retirement Savings Plan (RRSP) for their home down payment, without any tax consequences. In order to be eligible, buyers must have first-timer status, meaning they have not owned a home, or dwelled in one owned by their spouse, within the last four years. They must also have an active deal under way to either purchase or build a home, with an Agreement of Purchase and Sale in hand. The funds must also have been sheltered within the RRSP for a minimum period of 90 days before they can be accessed.

That RRSP cash comes with strings

However, the HBP isn’t just free money – buyers must replenish the amount taken from their RRSP with equal installments over a 15-year timeline; failure to make a payment earmarks that year’s portions of funds as income, and it will be taxed in full.

These restrictions on the program, as well as the fact that RRSPs are relatively under-used by the first-time buyer segment, have drawn plenty of criticism for the effectiveness of the HBP. According to Statistics Canada, just 20.1% of Canadians earning less than $80,000 use an RRSP, lower than the national average of 35%. Instead, this group appears to prefer Tax-Free Savings Accounts, which have far fewer restrictions; funds can come from anywhere (as opposed to an RRSP, where they must be earned income), and there are no minimum sheltering or repayment requirements.

How long would it take for home buyers to save $35,000?

Then there’s the question of whether the HBP actually makes a difference in helping buyers in Canada’s biggest markets, even in instances where they have saved and can access the full $35,000.

To find out, Zoocasa analyzed individual income thresholds in 14 regions across Canada, based on 2017 tax filings from Statistics Canada, assuming the income was earned income, eligible to create RRSP contribution room, and that individuals contributed the maximum to their RRSP annually (18% of earned income, to a maximum of $26,500). The study also compared how long it would take for those in the top 50%, 25%, and 10% income groups to save $35,000. The study finds that for those earning median incomes across Canada, it would take between 4.3 and 6.0 years to save $35,000 for the HBP.

Vancouver and Toronto buyers face longest savings timelines

As expected, the savings timelines are longest for those living in the most expensive cities. For example, the benchmark home price on the Vancouver MLS was $1,001,000 in December. A $35,000-cash infusion would account for just 3.5% of the home purchase – much less than the required 20% down payment. As well, it would take an individual homebuyer earning within the top 50% of incomes a total of 5.7 years to pull together $35,000 in their RRSP, based on an income of $34,100, assuming they set aside the maximum 18% ($6,138) annually.

It’s a similar scenario in Canada’s second-most expensive housing market; the benchmark price for Toronto homes for sale hit $819,700 in December, of which the HBP would account for just 4.3%. Again, an income earner within the top 50% would be looking at several years to max out their HBP savings. Based on an income of $32,600 and an annual contribution of $5,868, they’re looking at a savings timeline of six years.

Of course, the HBP will go a lot further for buyers in Canada’s most affordable markets. In Regina, for example, where the benchmark home price is $258,400, it would take just 4.5 years to save $35,000, which would account for a whopping 13.5% of the home purchase.

Check out the infographic below to see how long it would take for homebuyers to max out their HBP savings across Canada, based on the top 50, 25 and 10% income thresholds.

Penelope Graham is the Managing Editor at Zoocasa, a full-service brokerage that offers advanced online search tools to empower Canadians with the data and expertise they need to make more successful real estate decisions. View real estate listings on or download our free iOS app.

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