The 2022 budget has officially been released, $10 billion of which will be dedicated towards Canada’s housing market. But hopeful homebuyers may need to wait to feel the effects of its measures, according to new insights from RBC Economics.
By RBC’s count, this year’s budget outlined 29 new housing-related measures which will receive funding over the next five years, many of which were borrowed from the federal Liberal party’s 2021 election campaign.
Some of the biggest budget items include $4 billion over five years towards the Housing Accelerator Fund, which will be managed by the Canadian Mortgage and Housing Corporation (CMHC) to speed up construction approval times, and update zoning rules to build 100,000 new homes by 2025. A new 15 per cent multi-generational home renovation tax credit, an anti-flipping tax, a first home savings account and a two-year ban on foreign buyers were also outlined in the 2022 budget, among other policies.
Despite the multi-billion dollar investments Deputy Prime Minister and Minister of Finance Chrystia Freeland has announced, it will take some time for the proposed budget measures to kick in.
“Whether Freeland’s new measures will bring quick relief to Canadians struggling with poor housing affordability is another story,” said RBC’s assistant chief economist, Robert Hogue, in a recent RBC Thought Leadership article. “Many of the measures announced won’t be effective for some time. Still efforts to address supply issues go in the right direction even if federal power is limited in that regard, and any benefits will be realized only gradually.”
Big spending makes intentions clear, could make big market impression
Some of the budget’s items are “clearly designed to shake things up,” according to Hogue.
Policies like the foreign buyer ban and anti-flipping tax have been proposed to inflict change in the market’s direction. However, the RBC economist noted that the direct market impact of a temporary ban on foreign purchasers “will be minimal,” given that non-residents own less than two per cent of the housing stock in most markets.
Other measures like the budget’s accelerator housing fund and rapid housing initiative focus more on the supply side, while increased tax credits and a new tax-free savings account are intended to help buyers in today’s tricky market.
“Individually, many of these measures aren’t likely to move the needle much or will do so only gradually over time,” said Hogue. “But together, they send a loud message that the government is eager to do what it can to steer the market onto a more sustainable — and affordable — path.”
Hogue noted that RBC is happy to see the budget’s focus on building up home supply through the Housing Accelerator Fund and spending on affordable housing, both of which “go in the right direction.” Given how much housing affordability has deteriorated — making it harder to buy now than at any point since 1990 — measures to assist buyers in the budget weren’t surprising. However, Hogue cautioned that measures which heighten demand for housing can perpetuate the imbalance between demand and supply while doing little to cool price appreciation.
“Nevertheless, we think the breadth of measures announced in this budget will make a big impression on the market,” said Hogue. “Large housing packages introduced by British Columbia in 2016 and Ontario in 2017 caused market participants to pause (briefly) while assessing implications. Minister Freeland’s housing budget has the potential to do the same.”
