Federal Government pledges more funding for affordable housing
What does it mean for the average Canadian?
On November 21st, the Government of Canada unveiled its 2023 Fall Economic Statement, an annual fiscal report that provides an update on the state of the Canadian economy and the government’s plans for future spending. The report – acutely focused on Canada’s housing affordability and supply crisis – announced new funding for the creation of more affordable housing and purpose-built rental units. New rules regarding the mortgage stress test were also unveiled.
For Canadians planning to buy a home or rent a property in the near future, these initiatives will lead to the creation of some much-needed housing supply in some of the country’s most expensive regions.
Here’s what you need to know about housing initiatives announced in the 2023 Fall Economic Statement:
The Canadian Mortgage Charter – Since interest rates started to rise in March 2022, many variable-rate mortgage holders have faced fast-rising monthly payments and, in some cases, negative amortization as interest payments outpace their mortgage principal. Thousands of Canadians will also be required to renew their mortgage at a much higher interest rate in the next two years compared to the ultra-low rates offered during and just prior to the pandemic. In light of these financial challenges, the federal government has put forward new measures for financial institutions to provide Canadian borrowers with mortgage relief options.
The Charter includes:
- Permitting temporary extensions of mortgage amortizations
- Waiving fees that would have previously applied for relief measures
- Dropping the requirement for insured mortgage holders to requalify under the insured minimum qualifying rate (stress test) when switching lenders at the time of their mortgage renewal
- Requiring lenders to contact homeowners four to six months prior to their mortgage renewal to inform them of their financial 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
- Waiving interest on interest in the event that mortgage relief measures result in a temporary period of negative amortization
New funds for affordable housing – In an effort to build more homes faster, the federal government has pledged billions of dollars in spending towards the creation of affordable and purpose-built rental housing. An additional $1 billion will be allocated over three years to non-profit, co-op, and public housing providers through the Affordable Housing Fund to build more than 7,000 new homes by 2028. The Co-operative Housing Development Program will also receive nearly $310 million in new funding.
Incentives for apartment builders – To encourage the creation of much-needed rental housing, the 2023 Fall Economic Statement outlines new funding for home builders. Starting in 2025-2026, the federal government says it has committed an additional $15 billion in funding for the Apartment Construction Loan Program, which provides low-cost financing to builders and developers. This top-up will support the creation of more than 30,000 additional new homes across Canada, bringing the government’s total goal to 101,000 new homes by 2031-2032.
Tax limitations on short-term rentals – With the demand for long-term housing options so high across Canada, the federal government is placing stricter measures on short-term rentals in the hopes of encouraging property owners to list their homes for sale or for longer leasing periods. The 2023 Fall Economic Statement introduced $50 million in funding over three years to support municipal enforcement of restrictions on short-term rentals. Additionally, income tax deductions for expenses incurred on short-term rental income will be denied in provinces and municipalities that have banned short-term rentals. This will also apply to short-term rental operators who are not compliant with provincial or municipal licensing, permitting, or registration requirements.
Want to know more about the 2023 Fall Economic Statement? Read the full report here.