With the release of Budget 2022, the Canadian federal government unveils where it aims to spend tax dollars. One major question on Canadians’ minds involves affordable living in Canada, however.
To tackle this issue, the federal government has released several initiatives and programs to make living in Canada more affordable.
Housing supply
Building houses and owning an affordable home is a crucial issue the government must address since homeownership is a goal for many Canadians.
In addition to providing shelter and stability, a home is typically a large investment and ends up being the largest contributor in a person’s total net worth.
As a result, Budget 2022 includes several investments and programs to assist first-time home buyers and build multigenerational wealth.
One of the most important measures to make housing more affordable is to increase the supply of housing units in Canada.
To solve supply issues, Budget 2022 proposes to provide $4.0 billion over the five years to 2027 to the Canada Mortgage and Housing Corporation to launch a new Housing Accelerator Fund. This fund is designed to be flexible to the needs and realities of cities and communities, but the ultimate goal is to create 100,000 new housing units over the five years to 2027.
In addition, Budget 2022 proposes an additional $1.5 billion over the two years to 2024, to extend the Rapid Housing Initiative. This fund is responsible for providing many people with affordable housing units and is expected to create at least 6,000 new affordable housing units over the next two years.
In addition to expanding Canada’s housing supply, Budget 2022 aims to restrict the amount of foreign money entering Canada, which is often used to purchase residential real estate. As more foreigners buy land and build properties in Canada, this will increase demand for Canadian real estate, causing housing prices to increase.
To promote Canadian-owned housing, Budget 2022 proposes restrictions that would prohibit foreign commercial enterprises and non-Canadian citizens from acquiring nonrecreational, residential property in Canada over a two-year during.
New ways to save
Budget 2022 also includes plans to create a new Tax-Free First Home Savings Account (TFFHSA) to help struggling Canadians save for the cost of a down payment on a house. This savings account will enable people to save between $8,000 and $40,000 per year toward the purchase of a first home.
Similar to other tax-free saving accounts, withdrawals are nontaxable, including any investment income generated within the account; contributions are also tax-deductible. This account is forecast to roll out in 2023, with federal estimates putting the economic impact from the account at $725.0 million over the next five years.
Another way Canadians may save is by using the myriad of tax credits embedded in the Budget 2022 proposal. One of the proposed tax credits is a Multigenerational Home Renovation Tax Credit, which would provide up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability.
This credit is intended for families that live with multiple generations in one housing unit. Starting in 2023, this refundable credit would permit families to claim 15.0% of up to $50,000 in eligible renovation and construction costs.
Main takeaways
Overall, Budget 2022 has a lot of affordable housing proposals, grants and credits available to make Canadians’ lives more affordable. By building more houses and increasing the housing supply, the price of homes is forecast to become more affordable over the five years to 2027.
Additionally, the new savings account and other tax credits will enable more individuals and families to purchase homes and build generational wealth.
