The 2019 Federal Budget includes some potential benefits for your clients. Take a deeper dive into the details to ensure you have the knowledge you need to give your clients accurate information and expert advice.
On Tuesday, March 19, the federal Liberals released their final budget before the upcoming federal election. As expected, Budget 2019: Investing in the Middle Class contains a number of benefits for the middle class (Canadians with taxable income between $44,700 and $89,401).
Budget 2019 focuses extensively on housing. Sprinkled throughout the document, there are announcements intended to help people buy their first home, increase the supply of housing, address tax evasion, money laundering and rule compliance in real estate, as well as fund energy efficient choices and municipal infrastructure.
Keep in mind, full implementation of the initiatives and funding are dependent on the document receiving the required approvals in Ottawa and the will of the political party that forms the government after the federal election on October 21.
Here are the eight key announcements.
1. There’s a new First-Time Home Buyer Incentive.
The new First-Time Home Buyer Incentive program is a $1.3 billion investment that is expected to be operational by September 2019. The program would allow first-time home buyers to lower their monthly payments by sharing the cost of the mortgage with the government. The Incentive would provide funding of 5 or 10 per cent of the home purchase price.
Here’s an example from the government on how the program could work. If a borrower buys a new $400,000 home with a 5% down payment ($20,000) and a 5% Canada Mortgage and Housing Corporation (CMHC) shared equity mortgage ($20,000), the size of the borrower’s insured mortgage would be reduced from $380,000 to $360,000, helping to lower the borrower’s monthly mortgage bill.
CMHC would offer qualified first-time home buyers a 10% shared equity mortgage for a newly-constructed home or a 5% shared equity mortgage for an existing home. The larger shared equity mortgage for newly-constructed homes is seen as a way for the government to help encourage the home construction needed to address some of the housing supply shortages in Canada, particularly in the larger cities.
Qualified first-time home buyers are described as those with household incomes of under $120,000 per year who are trying to buy a home that is no more than four times their annual household income (including their insured mortgage and the Incentive amount). That’s first-time home buyers trying to buy a home valued at less than $480,000.
A quick search on Paragon revealed 1,300 properties available in the Fraser Valley for less than $480,000 on March 20, 2019.
The First-Time Home Buyer Incentive fund would be administered by the CMHC, utilizing $1.25 billion in funds over three years. Terms and conditions will be released in the coming months and the program is expected to be operational by September 2019.
2. The Home Buyers’ Plan (HBP) RRSP withdrawal limit has been increased from $25,000 to $35,000 and made available to those experiencing relationship break up.
An increase to the RRSP withdrawal limit under the existing Home Buyers’ Plan from $25,000 to $35,000, effective immediately, is a $100 million investment by the federal government and a key ask of CREA and Realtors across Canada. The move is intended to allow first-time home buyers to have greater access to their own retirement savings to buy a home. To date, it is estimated the program has helped over 2.9 million Canadians achieve homeownership.
As well, the federal government has immediately expanded access to the HBP for people going through significant life changes such as a breakdown in marriage or common-law partnership. This is another long-standing ask of CREA and Realtors across Canada and is a $45 million investment by the federal government.
3. No adjustments will be made to the mortgage stress test or amortization period at this time.
CREA says the federal government will continue to monitor the effects of mortgage finance policies and adjust them according to economic conditions. Further, the new First-Time Home Buyer Incentive program will essentially do the same thing as a 30-year amortization period; lower monthly payments for home buyers and give them a leg up into the market.
BCREA says while they welcome the incentives for first-time home buyers, the announced measures fail to address the damage caused by the mortgage stress test. The association asserts the federal government needs to review the mortgage stress test against interest rate changes since its introduction and re-institute 30-year mortgages to further help Canadians achieve their goals of homeownership.
4. New support was announced to help increase housing supply
Expansion of the Rental Construction Financing Initiative
The federal government continues to support the Rental Construction Financing Initiative. The program was launched in 2017 and provides low cost loans to municipalities, private developers and builders and non-profit housing providers to support the construction of new rental housing. Budget 2019 allocates an additional $10 billion over nine years to extend the program until 2027-2028 and help build 42,500 new housing units across the country.
New Housing Supply Challenge
A new Housing Supply Challenge funded by $300 million would invite municipalities and other stakeholders to identify innovative ways to break down barriers that limit the construction of housing. More information on the Challenge would be released in summer 2019.
Review of housing supply and affordability
The federal Minister of Finance, BC’s Finance Minister and the Minister of Municipal Affairs and Housing agreed to work together in an Expert Panel on Housing Supply and Affordability.
Ongoing support for the National Housing Strategy
Launched in Budget 2017, the National Housing Strategy is a $40 billion investment in affordable housing. The government is proposing to introduce legislation that would require the federal government to maintain the National Housing Strategy and require regular reporting on the progress to Parliament.
5. The federal government wants to strengthen the rules and compliance in Canada’s housing market.
The Canada Revenue Agency (CRA) would be creating four new audit teams dedicated to residential and commercial real estate in high-risk regions such as BC and Ontario. This is intended to help ensure that real estate tax provisions will be respected and will focus on:
- sale of principal residence is reported on tax returns;
- capital gain from a real estate sale is accurately reported as taxable income (principal residence tax exemption still applies);
- money made on real estate flipping is reported as income;
- commissions earned are reported as taxable income; and
- GST/HST on new residential properties is properly remitted to the CRA.
6. There will be more resources for deterring financial crime in real estate.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) will increase their examinations in the real estate sector to improve the detection of money laundering activities in real estate transactions.
7. New funding measures will help improve energy efficiency in buildings and transportation choices.
To increase energy efficiency in residential and commercial buildings, the government plans to allocate $1.01 billion to the Federation of Canadian Municipalities through their Municipal Green Fund, which brings municipal sustainability initiatives to life – improving the quality of life of millions of Canadians.
As well, the federal government will encourage Canadians to move towards the adoption of more zero-emission vehicles. Budget 2019 aims to:
- expand the network of zero-emission vehicle charging and refuelling stations;
- work with car manufacturers to establish voluntary zero-emission vehicle sales targets to ensure that vehicle supply meets increased demand; and
- provide Transport Canada with the funds to offer a new federal purchase incentive of up to $5,000 starting in 2019-2020 for people choosing to purchase or lease zero-emission vehicles with a) six seats or less where the base model (trim) manufacturer’s suggested retail price (MSRP) is less than $45,000 (higher priced versions/trims of these vehicles, up to a maximum MSRP of $55,000, is also eligible for purchase incentives) or b) seven seats or greater, where the base model MSRP is less than $55,000 (higher priced versions/trims of these vehicles, up to a maximum MSRP of $60,000, is also eligible for purchase incentives)
Together with the other incentives already available in BC, the new federal incentive may make it easier for you and your clients to move towards buying a money-saving and cleaner zero-emission vehicle.
Here’s a breakdown of the potential savings:
| Program | Potential savings on the purchase of an eligible vehicle up to $45,000 |
| New federal incentive | up to $5,000 |
| BC Clean Energy Vehicles for BC (CEV) | up to $3,000** |
| BC SCRAP-IT (A non-profit program which encourages people to replace a polluting vehicle with a cleaner vehicle.) | $6,000 |
| Total incentives available: | up to $14,000 |
** The provincial incentive is available for the purchase or lease of qualifying vehicles priced at up to $55,000.
Note: The potential savings are dependent on the type of vehicle purchased (e. g. hybrid versus full electric, new versus old, etc.).
As well, the government is supporting businesses’ adoption of zero-emission vehicles by proposing that qualifying vehicles be eligible for a full tax write-off in the year they are put in use. The proposed measure applies to qualifying vehicles purchased on or after March 19, 2019 and before January 1, 2024. Capital costs for eligible zero-emission passenger vehicles (e. g. cars and SUVs) will be deductible up to a limit of $55,000 plus sales tax. Vehicles in respect of which assistance is paid under the new federal purchase incentive will be ineligible for the 100% write-off.
8. There’s more money to support municipal infrastructure projects.
Budget 2019 includes a one-time top-up of $2.2 billion through the federal Gas Tax Fund that would double the government’s commitment to municipalities in 2018-2019, and help ensure communities have the funds needed to pay for crucial repairs and other important local projects.
Perhaps there will be more money available from the federal government to support the City of Surrey’s goal to extend the SkyTrain from Surrey Central all the way to Langley?
More information:
To read the full Budget 2019 document, click here.