On March 19th, PM Trudeau’s Liberal government released its 2019 budget. This being an election year, the budget includes several olive branches to their target demographic – including an anticipated measure to help first-time home buyers, i.e. millennials, to break into the market.
The measure, the First Time Home Buyer Incentive, proposes an interest-free shared mortgage with the Canada Mortgage and Housing Corporation. So if you can put up the down payment, you can share ownership of your home with not only the bank, but with the government.
The CMHC would front 10% of the purchase price of new-build homes, and 5% of the price of resales. This would apply only to buyers with an income of less than $120,000/yr. The hope is to boost the supply of new homes with the larger loan amount, which is something we of course support.
This kind of measure won’t have much of an effect in the high-priced market of Vancouver. In fact, if this idea seems familiar, it’s because it’s almost identical to a 2017 measure introduced by B.C. Liberals in THEIR election year, and which was widely described as a failure before being axed by the NDPs as soon as they took power. It was deemed difficult to understand, and people weren’t thrilled about sharing ownership of their home with the government.
So why is the federal version different? Well, for one thing, the incentive amount will be capped at four times the income of the prospective buyer. This means that homes must be priced below $480,000 to qualify – eliminating pretty much all detached homes and townhomes in the Lower Mainland.
The federal program will also allow a buyer to wait until they sell their home to repay the loan. The B.C. version required buyers to start repaying after five years. This would keep high-risk buyers from getting in over their heads with mortgage debt. The CMHC, in fact, were against the B.C. version because they predicted it would exacerbate family debt (their pick for the biggest societal ill) while driving up demand for homes in a supply-starved market, thus worsening the affordability crisis.
But the CMHC is firmly behind the federal version. The program is expected to attract over 100,000 home buyers over the next three years. (The B.C. program forecast 42,000 applicants but only got 3,000 in the first year.)
The Liberals are lagging pretty considerably in current polls, and this courting of the millennial vote is clearly a political strategy. The policy will only go into effect if they’re elected in October, after all. But the dream of homeownership still looms large for most Canadians, and any attempt to ease that path will likely be eagerly welcomed by our young electorate.
