First-Time Home Buyer Incentive to Become More Useful in Select Markets
First-time homebuyers in three of Canada’s most expensive housing markets will soon have an easier time qualifying for the First-Time Home Buyer Incentive (FTHBI).
The government’s recent Fall Economic Statement included changes that will ease eligibility criteria for first-time buyers in Toronto, Vancouver and Victoria. The changes were first announced in September 2019, but are now expected to come into effect in spring 2021, the government said.
Here’s an overview of the changes:
First-time buyers will be able to purchase a home up to 4.5 times their household income
vs. four times their income currently
They can participate if their household income is $150,000 or less
vs. $120,000 currently
With a minimum down payment, the maximum purchase price that will qualify under the program rises to about $722,000 in those three markets
vs. approx. $505,000 currently nationwide
When these changes were first proposed over a year ago, the government said it would help an additional 20,000 Canadians benefit from the shared-equity program.
First-Time Buyers Continue to Shun Program
Since it was launched in 2019, the FTHBI has struggled to gain traction among first-time buyers. As of Sept. 30, 2020, the Canada Mortgage and Housing Corporation (CMHC), which administers the program, said it has received just 9,520 applications worth about $173 million in shared equity mortgages.
When the program was first announced, the government earmarked $1.25 billion over three years with the goal of assisting 100,000 homebuyers to purchase homes.
Under the program, the government provides first-time buyers with an interest-free down payment loan of up to 5% for resale purchases, and 10% if the property is a new build. The CMHC then participates in any rise or fall in value of the home, and the loan must be repaid either when the house is sold or within 25 years.
Earlier this year, CMHC CEO Evan Siddall defended the slow take-up of the program at that time.
“In addition to CMHC’s challenges in estimating demand for the FTHBI, uneven lender support is a complicating factor,” he tweeted. “It may also be evidence that there is less unsatisfied FTHBI demand due to the stress test than people claim. People can always buy less expensive homes.”
The program continues to be most popular in Quebec, where 3,916 applications have been approved, representing $63.4 million in shared equity, $49.3 million of which was funded through the program.
There were 2,591 approved applications from Alberta representing $60.8 million in mortgages. Ontario saw just 743 approved applications worth $13.6 million, while B.C. saw 327 applications approved worth $5.9 million in mortgages.
This likely speaks to one of the biggest challenges with the program in the first place, which is that it did little to help those struggling to afford a home in some of the country’s most expensive housing markets. The FTHBI limited home purchases to $505,000 or less for those making the minimum down payment. Meanwhile, the average home price in Toronto is now $955,615 as of November, and $1.044 million in Vancouver.