Federal budget offers money for homebuyers, skills training, municipalities
|calgaryherald.com 19 Mar 2019 at 17:54|
The federal government’s plan to assist first-time homeowners by picking up a portion of their mortgage costs is a positive move, said the chair of the organization that represents Alberta’s realtors, though she cautioned many Calgarians may find their household income is too high for them to qualify.
Jennifer Gilbert, chair of the Alberta Real Estate Association, said many households will not meet the requirement for the new means-tested incentive the federal Liberals unveiled Tuesday in the 2019 budget.
“The new homebuyer changes are positive, however the median income in Calgary is $67,000, which may eliminate couples from availing themselves of the program,” Gilbert said in an email.
Under the terms of the program, eligible buyers with household incomes under $120,000 (and with mortgages no more than four times the household’s total income) would see the federal government pick up part of the costs of their mortgages to lower their monthly payments. The measure, expected to cost $1.25 billion over three years beginning this fiscal year, would target Canadians “that face legitimate challenges entering housing markets” after qualifying for a mortgage, the budget document says. The government would recoup its costs when the house is sold, although the budget document isn’t clear what would happen if the home is sold for a loss.
The program, some details of which are yet to be finalized, is part of a tranche of federal government spending that includes establishing a national expert panel on housing supply and affordability, better data collection and $300 million for a contest to encourage cities to come up with new ways of expanding housing stock.
The new measures could increase the annual number of new homebuyers nationally to 140,000 from 100,000 by lowering monthly payments without creating higher household debt loads, said Finance Minister Bill Morneau, who was confident the measures won’t cause a spike in housing prices.
“We’re recognizing that it is challenging for people in the housing market; it’s a real issue, but what we’ve done is we’ve carefully looked at what’s the best way to deal with that issue,” Morneau told a news conference.
The budget contained no mention of an easing of the federal mortgage stress test rules, introduced at the beginning of 2018 to ensure homebuyers can still afford their mortgages even if interest rates rise substantially. Both the Canadian Real Estate Association as well as a number of Alberta politicians — including UCP Leader Jason Kenney and Calgary Coun. George Chahal — have urged the federal government to adopt a , essentially creating looser rules for homebuyers in markets with struggling economies such as Calgary.
The Canadian Real Estate Board is expecting Calgary home prices to fall by an average of 2.3 per cent over the course of the year, a continuation of a four-year trend of declining sales activity and rising inventory in the Calgary housing market. According to the Canadian Real Estate Association, purchasers who previously qualified for the average detached benchmark home in Calgary would now need to save an additional $76,000 to purchase that same home as a result of the new mortgage rules.
However, Gilbert said that while the federal budget did not address the stress test issue, the announced new higher limit on tax-free RRSP withdrawals for first-time homebuyers is a “step in the right direction.”
“Housing debt is generally good debt, which the government appears to have recognized with the changes today,” Gilbert said. “The programs should apply to all Albertans, not just first-time homebuyers.”
The Calgary Chamber of Commerce criticized the 2019 federal budget Tuesday, saying while it contains some helpful incentives for individuals, it lacks the solutions necessary to stimulate sluggish growth projections for the Canadian economy.
“The government’s reluctance to address Canada’s tax competitiveness issues, regulatory hurdles and the inability to get our products to market is putting Canadian businesses, jobs and households in jeopardy,” said Chamber CEO Sandip Lalli.
Lalli added she was encouraged by the $4.6 billion over five years set aside in the budget to help more Canadians afford and access skills training . However, she said she is concerned that the cost burden of a newly announced tax credit for employees enrolled in skills training and upgrade programs could be borne by the business community in the form of increasing employment insurance costs. (Employees who seek out such training will also be eligible for job protection and EI benefits during their time away from work).
Carol Howes, vice-president of Communications & Petroleum Labour Market Information (Petro-LMI), said the attention to skills training is a step in the right direction, but added it’s unclear whether the incentive will be big enough to entice enough workers to make a difference.
“Whether it will make a difference in terms of the labour market, it’s probably hard to say at this point,” Howes said.
The federal budget also contained significant support for municipalities, including a one-time, $2.2-billion top-up to the federal gas tax fund supporting municipal infrastructure. On Tuesday, Mayor Naheed Nenshi said the top-up will amount to about $68 million for Calgary in 2019.
“We’d love to see this be permanent,” Nenshi said. “This is a great way to prove to the federal government that municipalities can get this money to work right away, to get people to work and to get stuff we need to get built.”
Morneau’s budget Tuesday resembled Liberal economic plans that preceded it: the government will exhaust a big windfall, run near-term deficits of about $20 billion and offer no timeline to return to balance.
A stronger economy last year delivered an unexpected revenue bump that will flood an extra $27.8 billion into the federal treasury over the next six years, compared to government predictions in its November economic update.