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FTHBI tweaks

Reaction to First-Time Home Buyer Incentive Tweaks

The Liberal Party’s promise to tweak the First-Time Home Buyer Incentive—just 10 days after it was launched—is being viewed by many as nothing more than an election ploy.

Even if the changes would make the first-time homebuyer subsidy more accessible to buyers in the country’s hottest markets.

BACKGROUNDER: The basics of the equity-sharing program involve participants putting down at least 5% of the home’s value with their own money, while the government (through the Canada Mortgage and Housing Corporation) would contribute an additional 5% of the down payment if the purchase is of an existing home, or 10% if it’s a new build. More details available here.

What would change?

Should the Liberals be returned to power after the October 21 election, the FTHBI would be tweaked for buyers in the high-priced markets of Victoria, Vancouver and the Greater Toronto Area:

  • Buyers with a maximum household income of $150,000 could participate (vs. $120,000 for buyers in the rest of the country).
  • The mortgage value plus incentive amount could total up to five times their income (vs. four times in all other markets).
  • That brings the maximum purchase price possible under the program (assuming a 5% down payment) to $789,473 (vs. $505,263 for everyone else).

The promise was delivered by Justin Trudeau at a campaign stop in Victoria on Thursday. In campaign material, the Liberals said the changes would make the program accessible to an additional 20,000 first-time buyers, for a total of 120,000.

“It would seem at first (and second) glance, that this was in the Liberal hopper for some time waiting for the election to be called,” Nick Douce, Vice President and Managing Broker of Paragon Mortgage Group, told CMT. “The new price caps should have obviously been instituted in the initial announcement. An oversight or deliberate manipulation, you decide.”

Ron Butler of Butler Mortgage agreed.

“It was only announced five months ago,” he said. “Did everything change in five months or is this just a shameless attempt at buying votes?”

Reaction on Mortgage Professionals Canada’s Facebook page by industry professionals was much of the same:

  • “Anything for votes, what a disaster. (Trudeau’s) government implemented the stress test. Now he wants to buy votes with our own tax money.”
  • “Def an election strategy.”
  • “Making (homeownership) affordable with taxpayers’ money.”

However, Rob McLister, founder of, ran the figures and found the tweaks would provide benefits to participants, allowing them to afford a home slightly more expensive than non-participants.

“In fact, a couple with the minimum down and making $150,000 with no other debt could now afford roughly $40,000 more home by using the FTHBI,” he wrote, adding that if they buy new, where the government incentive is doubled, they could afford an even higher-priced home.

“For these reasons, we believe there’s now a decent chance that FTHBI demand could meet the government’s expected target of 120,000 users,” McLister added.

Still, Butler says his opinion of the program hasn’t changed.

“The idea that a government-sponsored, payment-free, second mortgage is a benefit to Canadians is questionable when there are simpler, easier ways to make homeownership more affordable,” he said.

The previous version of the program was championed by CMHC head Evan Siddall as being “surgically” designed to have “zero impact” on home price inflation.

Asked for comments on today’s announcement, Siddall tweeted: “…it is inappropriate for me to offer comments on policy during an election campaign. As a civil servant, I have a duty to remain impartial to the democratic process.”

Douce noted prices for homes over the original threshold will “now not moderate downward as they may have to allow for their inclusion in the original version (of the program).”

As a result, he says prices for lower-priced homes/condos in the affected markets will “hold fast or increase” as lower mortgage rates are again driving up prices “out of reach for those who cannot afford anything approaching the new $790,000 ceiling.”

Target on Foreign Buyers

The promised changes to the FTHBI was just one part of today’s campaign announcement. The Liberals also announced a 1% annual vacancy and speculation tax on residential properties owned by non-resident, non-Canadians.

“In recent years, housing speculation by foreign owners has become a major challenge in Canada’s housing market, driving up prices for Canadians and Canadian residents who are trying to buy their first home in their community,” read today’s campaign material. “We need to send a strong signal that Canada is no place for those who wish to purely speculate in the housing market.”

The tax would be in addition to existing foreign buyer taxes, such as B.C.’s 15% foreign buyer’s tax and Ontario’s 15% Non-Resident Speculation Tax.

“It’s debatable how much the move will help since only 9,386 properties are affected by B.C.’s existing speculation tax,” McLister noted. “At the very least, however, it will dampen market sentiment further.”