Canada is facing a housing crisis.

Globally, Canada has long had one of the highest rates of home ownership amongst economically advanced countries. These high rates of home ownership, coupled with high rates of immigration, have created a greater demand for more housing.

But the real burden on the market is property investors, both inside and outside of Canada, who are looking to rent or flip homes for additional income.

The demand for housing, and lack of supply for new buyers, has driven costs upward. 

And the recent rate hikes by the Bank of Canada have only made housing affordability more of a problem.

As of December 2022, RBC reported that homeowners were spending an average of 62.7% of their income on housing costs. Since 2015, housing prices have been going up 50% quicker than wages. So, now, the housing crisis is being felt by homeowners, not just buyers.

In an attempt to begin correcting this market problem, the Canadian government has introduced a number of new housing initiatives for 2023:

First-Time Home Buyers’ Tax Credit

Coming into effect for the 2022 tax year, the First-Time Home Buyers’ Tax Credit will increase. Previously, buyers could claim a $5000 credit and receive a rebate up to $750 (based on the lowest personal income tax rate of 15%). The new number used to calculate this rebate is $10,000, allowing for a rebate of up to $1,500.

It isn’t a life-changing amount of money, but it can help new buyers to get into the market more affordably.

Two-year Ban on Non-Canadians Purchasing Residential Property

As of January 1, a two-year ban will be placed on non-Canadians purchasing residential properties. This prohibition is designed to prevent foreign investors from purchasing single family homes, 2- and 3-unit dwellings, condominiums, and other similar properties in an attempt to reduce speculation in the Canadian housing market.

The ban will not apply to international students, temporary residents, foreign nationals, and refugee claimants.

Multigenerational Home Renovation Tax Credit

The Multigenerational Home Renovation Tax Credit is a refundable credit, up to $7,500, to help families build a secondary unit in their home for seniors or adults with disabilities.

Multigenerational homes are more common in many cultures, and are becoming more popular as a way for caring for elderly relatives or those with disabilities. In the past 20 years, multigenerational homes have increased 40% in Canada.

To meet the qualifications, the senior or a family member must own the home, and they must build a self-contained secondary unit with a private entrance, kitchen, bathroom, and sleeping area.

Coming into effect on January 1, 2023, this initiative could help families to find more affordable housing options by sharing the costs of one home rather than living in separate residences. It will also provide some financial relief for and reduce strain on caregivers.

Residential Property Flipping Rule

This new rule in Budget 2022 ensures that profits made from flipping residential real estate are subject to full taxation.

For the purposes of this new rule, a “flipped property” refers to “a housing unit of a taxpayer located in Canada that was owned by the taxpayer for less than 365 consecutive days (less than a year) prior to the disposition of the property”. These profits would instead be deemed “business income.”

Considerate exceptions have been put in place for: death, a household addition, separation, personal safety concerns, disability or illness, an employment change, insolvency, or involuntary disposition.

The new Residential Property Flipping Rule will apply to any residential homes sold on or after January 1, 2023.

Tax-Free First Home Savings Account

The government is working with financial institutions to create the infrastructure for these FHSAs, which will give first-time home buyers the ability to save $40,000 on a tax-free basis with a contribution limit of $8,000 per year.

The rules for the Tax-Free Home Savings Account don’t come into effect until April 1, 2023. However, Chartered Professional Accountants of Canada say Canadians can begin contributing.