Tembo always keeps an eye on how policymakers are responding to housing issues. Politics may not always be the most popular topic, but politicians make the world. Given economic instability and interest rates back at long-term historical averages, policy changes and government initiatives are paramount for both prospective homebuyers and mortgage lenders. The recent unveiling of the federal budget brings perhaps the biggest set of housing changes in living memory. This budget has the potential to reshape the housing sector in the Greater Toronto Area (GTA), and beyond. From increased housing supply to innovative financing options, let’s delve into how these measures will impact Toronto’s private mortgage lending sector and empower aspiring homeowners.
Expanding Housing Supply:
With the ambitious commitment to construct 3.87 million new homes by 2031, the federal government’s budget sets a robust foundation for addressing Toronto’s housing shortage. For private mortgage lenders in Toronto, this influx of housing projects presents a myriad of opportunities to support homebuyers in securing their dream properties.
Empowering First-Time Buyers:
The extension of 30-year mortgage amortizations exclusively for first-time buyers of new builds is a game-changer in Toronto’s competitive real estate market. This initiative not only enhances affordability but also incentivizes prospective homeowners to explore newly developed properties, thereby boosting the construction sector and stimulating economic growth.
Enhanced Financial Flexibility:
The budget’s revisions to the Home Buyer’s Plan, including raising the withdrawal limit to $60,000 and extending the RRSP repayment term, offer much-needed financial flexibility for Toronto’s aspiring homeowners. These changes give our clients more flexibility and options in tailoring financing solutions that cater to the diverse needs of their clientele, facilitating smoother transactions and fostering long-term relationships.
Unlocking Land Resources:
Through the review of federal lands portfolios and the establishment of the Public Lands Acquisition Fund, the budget endeavors to identify and acquire additional land for housing development. For private mortgage lenders in Toronto, this initiative signals a promising influx of properties into the market, paving the way for expanded lending portfolios and increased revenue streams. The budget proudly showed maps of huge numbers of housing projects across the country being built on public lands.
Investing in Infrastructure:
The infusion of funds into the Apartment Construction Loan Program and the Housing Accelerator Fund underscores the government’s commitment to accelerating housing construction and bolstering infrastructure development. Recall that the recent Ontario provincial budget allocated billions in infrastructure spending to help developers churn out more houses. All levels of government are facilitating new developments and reducing the costs developers have to pay to build infrastructure and new housing.
Promoting Innovation:
The allocation of resources to initiatives such as the Homebuilding Technology and Innovation Fund and support for local innovative housing solutions underscores the government’s dedication to fostering a culture of innovation in Toronto’s housing sector.
Facilitating Secondary Suite Development:
The introduction of the Canada Secondary Suite Loan Program presents a unique opportunity for Toronto homeowners to unlock the potential of their properties and increase rental income. Although the Ontario government has come out against blanket regulations to facilitate fourplexes without permits, they’ve delegated this authority out to municipalities.
Driving Sustainability:
The Canada Greener Homes Affordability Program aims to promote energy efficiency retrofits for Canadian households, aligning with Toronto’s commitment to sustainability and environmental stewardship. Private mortgage lenders can support homeowners in accessing financing for eco-friendly upgrades, contributing to a greener, more resilient cityscape.
Tax hikes could cool investment in housing:
To pay for all of its spending, the budget includes significant adjustments to capital gains tax, and updates to tobacco and vaping regulations.
Capital Gains Tax Revision:
One of the noteworthy changes outlined in the budget is the adjustment to the inclusion rate on capital gains. Effective June 25, 2024, the government plans to increase the inclusion rate on annual capital gains exceeding $250,000 for individuals and all capital gains for corporations and trusts from one-half to two-thirds. This means that only one-third of any capital gain greater than $250,000 will be tax exempt. It’s important to note that the principal residence exemption remains unaffected by this change, providing relief to homeowners.