Federal Budget Recap: Foreign Buyers Tax Concerning, Other Measures Welcomed
TAGS: Energy Efficiency Federal Budget FINTRAC Flood Protection Foreign Buyer's Tax Housing Affordability retrofits Speculation and Vacancy Tax
On April 19, Canada's Minister of Finance Chrystia Freeland introduced the Liberal government's first budget since the beginning of the COVID-19 pandemic. The budget provides significant funds to many programs, including several to assist homeowners and renters, increasing the federal deficit by an estimated $382 billion, but also includes measures which are concerning to BCREA.
The budget calls for a tax on all foreign owners of vacant residential property in Canada, to be levied annually beginning in 2022. Once the legislation is introduced and passed, it is expected that all non-citizen and non-permanent resident owners of residential property in Canada will be required to file an annual declaration. The tax is estimated to bring in $700 million of tax revenue over the next four years, with revenues supporting investments into housing affordability.
BCREA response to foreign buyers tax
BCREA is concerned about the effectiveness of this foreign buyers tax. Creating obstacles to homeownership for non-Canadian citizens or permanent residents can interfere with Canada's ability to attract foreign investment. This is in contradiction to the federal budget's call for strengthening Canada's immigration system. As the budget says, "diversity is our strength, including as a source of our economic strength," yet this tax will reduce the benefits of foreign investment. Foreign investment improves job growth, introduces new technologies and provides economic stimulation.
In addition, much of BC already has a 20 per cent foreign buyer tax, meaning the federal tax would be redundant and overly punitive. In the government's promised upcoming consultation on the proposed tax, we will remind them that BC has a similar preexisting tax.
The need for supply-side policy
Demand-side measures to influence long-term housing affordability are often ineffective and short-lived, which is why BCREA is calling on governments to focus on policies to increase housing supply. We were encouraged that Ms. Freeland agreed with this approach.
In the federal budget recap attended by BCREA Vice President of Government Relations and Stakeholder Engagement Trevor Hargreaves, Ms. Freeland said "housing affordability is something that all Canadians are concerned about. Broadly speaking, housing affordability is a question of supply. We want to work with provinces and municipalities to find creative ways to increase housing supply."
Specifically, the budget reallocates $1.3 billion through the National Housing Co-Investment Fund and the Rental Construction Financing Initiative. We are also pleased to see the government extending several lockdown supports, including extending the rent subsidy and Lockdown Support. These supports will begin to decline July 4, 2021 and will be eliminated by September 25, 2021.
Additional budget notes
We were also encouraged to see the government commit $4.6 million over four years to further anti-money laundering financing, with $0.6 million per year ongoing to enable FINTRAC to, in part, develop and administer a cost recovery scheme for its compliance activities. To increase transparency of ownership, the budget also commits to $2.1 million over two years to Innovation, Science and Economic Development Canada to support the implementation of a publicly accessible corporate beneficial ownership registry by 2025.
The budget also provided funding that will assist homeowners in improving their energy efficiency, as well as preparing for natural disasters caused by climate change. The budget committed $4.4 billion over five years to Canada Mortgage and Housing Corporation to help homeowners complete deep home retrofits through interest-free loans worth up to $40,000. Loans will be available to homeowners and landlords who undertake retrofits identified through an authorized EnerGuide energy assessment. The program will also include a dedicated stream of funding to support low-income homeowners and rental properties serving low-income renters including cooperatives and non-profit housing.
The budget commits funding to several floodplain mapping and wildfire protection programs to protect homeowners from disaster caused by climate change, , including:
- $1.4 billion over 12 years to top up the Disaster Mitigation and Adaptation Fund, to support a variety of projects, including floodplain mapping,
- $12 million over five years to renew the Standards to Support Resilience in Infrastructure Program so that it can continue updating standards and guidance in priority areas such as floodplain mapping,
- $64 million over three years to work with provinces and territories to complete floodplain maps for higher-risk areas,
- $101 million to enhance wildfire preparedness in Canada's National Parks, and
- $29 million over five years to support increased mapping of areas in Northern provinces and territories at risk of wildfires.
All of the above measures will take effect after receiving royal assent of the bill. Many political analysts are predicting that the budget is presaging an upcoming federal election that may be called later this year.
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