On August 11, Minister of Immigration, Refugees, and Citizenship Canada, Marc Miller, declared the availability of the tax-free First Home Savings Account, which is actively contributing to making homeownership more attainable for Canadians nationwide.
This policy has primarily been enacted as a response to the continuously rising housing costs in Canada. These escalating prices result from a combination of the acute labor shortage within the construction industry and the unprecedented influx of immigration the country has experienced in recent times.
What it aims for
With the soaring house prices, saving for a down payment has become unattainable for numerous Canadians, particularly the younger generation. Minister of Immigration, Refugees, and Citizenship, Marc Miller, revealed how the newly introduced tax-free First Home Savings Account is accessible and contributing to making homeownership attainable once more for Canadians throughout the nation.
The recently introduced tax-free First Home Savings Account is a registered savings account designed to facilitate Canadians in becoming first-time homeowners. It allows them to contribute up to $8,000 annually, up to a lifetime cap of $40,000, to be used for their initial down payment within a 15-year period.
To aid Canadians in reaching their savings targets, contributions to the First Home Savings Account are tax-deductible on annual income tax returns, similar to a Registered Retirement Savings Plan (RRSP). Similar to a Tax-Free Savings Account, withdrawals for the purpose of purchasing a first home, including any investment income generated from contributions, are not subject to taxation. It's a tax-free savings vehicle from start to finish.
Financial institutions have been offering the First Home Savings Account to Canadians since April 1, 2023, and it is presently accessible at seven financial institutions, with more planning to make it available in the near future.
How this new initiative will help
The new First Home Savings Account to help Canadians save for their down payment builds on the federal government’s work to accelerate housing construction and make homes more affordable for Canadians. This plan includes:
- a 2-year ban on non-resident, non-Canadians purchasing residential property to help curb speculation and ensure that houses are used as homes for Canadians to live in, rather than as financial assets for foreign investors
- a 1% annual underused housing tax on the value of non-resident, non-Canadian owned residential property that is vacant or underused
- making sure that profits from flipping properties held for less than 12 months are taxed fully and fairly
- doubling the First-Time Home Buyers’ Tax Credit to provide up to $1,500 in direct support to home buyers to offset expensive closing costs involved in buying a first home
- a new, refundable multigenerational home renovation tax credit, to provide up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability, starting this year
- applying the goods and services tax / harmonized sales tax to all assignment sales of newly constructed or substantially renovated residential housing to help address speculative trading in the housing market
- launching the new $4 billion Housing Accelerator Fund to remove local zoning barriers and incentivize housing construction, with the goal of creating at least 100,000 net new homes across Canada
- launching a $200 million stream under the Affordable Housing Innovation Fund to develop and scale up rent-to-own projects
- launching a third round of the Rapid Housing Initiative, which is providing $1.5 billion to create 4,500 new affordable housing units for Canadians in severe housing need, with 25% of investments going to housing projects targeted towards women
- delivering over $500 million towards the government’s goal of ending chronic homelessness through Reaching Home, Canada’s Homelessness Strategy
- delivering a top-up to the Canada Housing Benefit in December 2022, which provided low-income renters with a $500 payment to help with the cost of housing
How homebuilders immigration can help
While the First Home Savings Account aims to tackle housing affordability, it is equally crucial for the Government of Canada to assist homebuilders in recruiting the workforce needed to commence construction projects. That's why the IRCC (Immigration, Refugees, and Citizenship Canada) has taken the following steps:
1. Expanded the eligibility criteria for individuals with expertise in homebuilding occupations to attain permanent residence through the Express Entry system.
2. Conducted the inaugural trades-specific Express Entry draw on August 3, 2023, inviting 1,500 candidates with experience in trade-related occupations to apply for permanent residency in Canada.
Through these initiatives, the federal government is actively addressing critical labor shortages and attracting the talent necessary to expedite home construction.
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