The Federal Government announced that it would work towards building a more robust economy through the new mortgage charter to strengthen the economy for the benefit of every citizen, and this #FES2023 is the next phase of our project. With a focus on supporting the middle class and building more homes faster, we are taking action on the priorities that matter most to Canadians. pic.twitter.com/Wkh8R5CWDk
The Deputy Prime Minister and Minister of Finance, Chrystia Freeland, has announced a new plan designed to provide support for the middle class while addressing the need for increased housing.
“Our economic plan is about building a strong economy that works for everyone, and this Fall Economic Statement is the next phase of our plan. With a focus on supporting the middle class and building more homes, faster, we are taking action on the priorities that matter most to Canadians today—and we will continue doing everything we can to deliver for Canadians from coast to coast to coast,” Freeland said in a written statement.
The government is addressing two significant challenges Canadians face: the impact of rising interest rates and the lack of affordable housing.
First, to stabilize prices, make life more affordable, and protect Canadians with mortgages, the government has introduced the new Canadian Mortgage Charter which provides tailored mortgage relief for Canadians if they are in financial difficulty, and this will be done through financial institutions.
Homeowners dealing with financial difficulty related to increasing mortgage payments on their principal residence can expect to hear from their banks, who will provide a fair, reasonable, and timely relief plan to support them efficiently during this precarious time.
The government has outlined the key provisions of the new Canadian Mortgage Charter, which will affect Canadians in the following ways:
- Temporary extensions of the amortization period for mortgage holders at risk;
- Waived fees and costs that would have otherwise been charged for relief measures;
- Not requiring insured mortgage holders to requalify under the insured, minimum qualifying rate when switching lenders at mortgage renewal;
- Contacting homeowners four to six months in advance of their mortgage renewal to inform them of their renewal options;
- Giving homeowners at risk the ability to make lump sum payments to avoid negative amortization or sell their principal residence without any prepayment penalties; and,
- Not charging interest on interest in the event that mortgage relief measures result in a temporary period of negative amortization.
The government is actively working to address the second challenge, which is to expedite the construction of affordable housing. To achieve this, the economic statement allocates billions of dollars to finance the development of more homes and implement stricter regulations on short-term rentals, ensuring Canadians have access to suitable accommodations.
“To build more affordable housing for the most vulnerable Canadians, the 2023 Fall Economic Statement announces an additional $1 billion over three years, starting in 2025-26, for the Affordable Housing Fund. This investment will support non-profit, co-op, and public housing providers to build more than 7,000 new homes by 2028,” the government said in its report.
The federal government plans to provide an additional $15 billion in new loan funding to build more rental apartments starting in 2025-26. The government predicts this will support over 30,000 new homes across the country. By 2031-32, the program is expected to build over 101,000 new homes.
To build more homes faster, the federal government is removing the Goods and Services Tax (GST) from the construction of new rental housing projects, such as apartment buildings, student housing, and seniors’ residences. This change will apply to programs that begin construction between September 14, 2023, and the end of 2030, and that are completed before 2036.
“To protect Canadian renters from renovictions, the removal of GST will not apply to substantial renovations of existing residential complexes. This measure is intended to stimulate new supply, not take supply off the market. The federal government has also called on provinces that apply sales tax on new rental housing, or goods and services used in their construction, to likewise remove their provincial taxes,” the report read.
SHORT-TERM RENTALS
The federal government is taking stricter measures to mitigate short-term rentals as thousands of homes across the country are being used for tourists, ultimately lessening the number of homes available for Canadians in the housing market.
“In Montréal, Toronto, and Vancouver alone, an estimated 18,900 homes were being used as short-term rental properties in 2020—which has almost surely increased in recent years. These are not spare bedrooms in someone’s home—they are entire houses and apartments that are being used for tourists to rent—in many cases, only for a few days a week,” the report said.
The federal government aims to address the need for long-term housing for Canadians by implementing a measure to restrict income tax deductions for expenses related to earning short-term rental income. This includes interest expenses and applies to provinces and municipalities where short-term rentals are prohibited. The implementation of this measure is scheduled to take effect on or after January 1, 2024.
The fall economic statement suggests allocating $50 million over three years, beginning in 2024-25, to assist municipalities in enforcing regulations on short-term rentals.
