The federal government’s First-Time Home Buyer Incentive (FTHBI) was meant to offer a path to homeownership for those unable to tap the “Bank of Mom and Dad” for down payment assistance.
But first-time buyers have largely rejected the equity-sharing program that was first unveiled in September 2019, according to data tabled in Parliament and published by iPolitics.
Now halfway through the $1.25-billion three-year program managed by the Canada Mortgage and Housing Corporation (CMHC), only 14% of funds ($178 million) have been doled out to support first-time buyers.
That translates to 9,804 buyers who have taken advantage of the program so far, well short of the 100,000 buyers the government expected to assist over the life of the FTHBI.
The program involves the federal government contributing between 5% and 10% of a first-time buyer’s down payment. In exchange, the government gets an equal stake in the home’s equity, sharing in future gains or losses in value until the loan is repaid after 25 years or when the home is sold.
Of those participating in the program, the most common mortgage value is between $150,000 and $350,000, according to iPolitics. Just four successful applications were for a mortgage valued between $450,000 and $500,000.
In May of this year, the government announced changes to the program that would allow first-time buyers in Toronto, Vancouver and Victoria to qualify under the program for purchases up to $722,000, up from the roughly $505,000 limit in place for buyers in the rest of the country. The data published by iPolitics only goes to March 31, and wouldn’t include any applications that came in after the qualification changes in May.
The figures showed that homebuyers in Edmonton participated in the program more than any other city by a long-shot, at 1,288 successful applications, with Calgary a distant second at 636 applications. Toronto had just 39 homebuyers qualify for the program to date, while Vancouver saw nine and Victoria had just five.
Here’s a breakdown of successful FTHBI applications by city:
Courtesy: iPolitics.ca
Overall, Quebec has seen the highest number of participants at nearly 3,800, followed by Alberta with about 2,800. Another 770 came from Ontario and 342 were from B.C.
FTHBI Has Been Criticized From the Start
From day one, the First-Time Home Buyer Incentive had its critics. They argued that the program was ill-conceived, due largely to the fact there was virtually no industry consultation, and that it’s largely a government subsidy for those who can already qualify for a house.
But one of the biggest knocks against the FTHBI is that most first-time buyers can qualify for a larger mortgage if they don’t participate in the program.
“All eligible participants would actually be able to borrow more using a traditional 5% down insured mortgage,” Mortgage Professionals Canada President and CEO Paul Taylor told CMT previously. That’s even after the government’s tweaks that took effect in May, allowing participants in Toronto, Vancouver and Victoria to borrow up to 4.5 times their household income, up from four times.
As a result, Taylor noted the program doesn’t really create any new market entrants. “It provides an option for those who already qualify, in very specific parameters, to reduce their monthly payments at the tradeoff of home equity,” he said.
And if the current participation numbers are any indication, it appears most first-time buyers are opting for alternative ways to achieve home ownership—despite the hurdles—rather than sharing their home equity with the government through the FTHBI.
CMHC down payment assistance first-time home buyer incentive first-time homebuyers fthbi
Last modified: June 26, 2021
Once elections time is near the feds will come up with a different program and hopefully then it can help a bit more.
Super interesting and concise anaylsis here. If I followed along correctly, it looks like the FTHBI is really just helping to subsiize the price of houses for people who could already afford? Instead actually bringing new people into the market? It will be interested to see how the housing market across the country plays out over the upcoming years. I’ll be checking back for sporadic updates! Thanks.
Correct. Since you technically had to come to the table with the 5% down payment.
I took advantage of the 10% FTHNI benefit for a new build condo. It reduced my mortgage as well as the required mortgage insurance for those who come in under 20%.
What people do not talk about that while some people may have 5% saved.. it still may not be enough to live comfortably in a home. Some people might be living pay check to paycheck. This helps reduce the burden on new home owners, who can then either save their money or use it elsewhere.
In my case, it dropped it from 764$/mo to 676$/mo (about 100$/mo difference in mortage payment – or 1200$/yr). So these first few years I can work on eliminating credit card debt, and starting to build some savings.
It is interesting to read this article with the insight provided by one year of time. When it was launched, I was personally very skeptical about the FTHBI. For me, it was just like throwing out of the windows – as we say in French, because the government will only give more facilities to people already capable of dealing with a credit. But, in a context of inflation and Central Banks raising up their interest rates in the US and in Europe, the middle class may suffer, and have difficulties to access to mortgage. In this context, the FTBHI may find itself useful at last… let’s wait and see…
Time has past and the necessity of measures such as the FTHBI is greater than ever to help young people to have access to real estate property. With the rates going up and the bank being always more cautious, public authorities have to take action do reduce that kind of inequalities in Canada