New Housing Policy First Blush

From RBC
Housing measuresThe Government continues to monitor the effects of its mortgage finance policies, including the stress test for insured mortgages, but has not adjusted them in this budget. Instead, the budget introduces a plan to support housing affordability through a number of measures to boost supply in Canada’s housing and rental markets, as well as targeted measures for first-time home buyers and separated or divorced individuals.The First-Time Home Buyer IncentiveThe budget proposes to introduce the First-Time Home Buyer Incentive. This incentive utilizes a unique financing model that enables first-time home buyers to reduce the money required from an insured mortgage without increasing the amount they must save for a down payment. The incentive is a shared equity mortgage that will give eligible first-time home buyers the ability to lower their borrowing costs by sharing the cost of buying a home with Canada Mortgage and Housing Corporation (CMHC).Eligible first-time home buyers who have the minimum down payment for an insured mortgage1 may apply to finance a portion of their home purchase through a shared equity mortgage with CMHC. The Incentive will reduce the monthly payments required to buy a home. This will give first-time home buyers greater flexibility both in purchasing a home and managing its ongoing costs.CMHC will offer qualified first-time home buyers a 10 percent shared equity mortgage for a newly constructed home or a five percent shared equity mortgage for an existing home.As a means-tested program, the Incentive will be available to first-time home buyers with household incomes under $120,000 per year. At the same time, participants’ insured mortgage and the Incentive amount cannot be greater than four times the participants’ annual household incomes.Home Buyers’ PlanThe home buyers’ plan (HBP) helps first-time home buyers save for a down payment by allowing them to withdraw from their registered retirement savings plan (RRSP) to purchase or build a home without having to pay tax on the withdrawal. You are considered a first-time home buyer if you or your spouse or common-law partner have not owned a home that you occupied as your principal residence at any time during the relevant calendar year or in any of the four preceding calendar years.To provide first-time home buyers with greater access to their RRSPs the budget proposes to increase the HBP withdrawal limit to $35,000 from $25,000. As a result, a couple will potentially be able to withdraw $70,000 from their RRSPs to purchase a first home. This will be available for withdrawals made after March 19, 2019.To help those who have experienced a breakdown in their marriage or common-law partnership, the budget also proposes that these individuals may be permitted to participate in the HBP, even if they do not meet the first-time home buyer requirement. This is provided that they live separate and apart from their spouse or common-law partner for a period of at least 90 days as a result of a breakdown in their marriage or common-law partnership. Certain other conditions also need to be met. This measure will be available for HBP withdrawals made after 2019.Change in use rules for multi-unit residential propertiesWhen a property is converted from income-producing use (e.g., a rental property) to personal use (e.g., a residential property), or vice versa, you are deemed to dispose of and reacquire the property for income tax purposes. This deemed disposition also occurs when the use of only part of a property is changed and you cannot elect out of the deemed disposition. For example, this can occur where you own a multi-unit residential property, such as a duplex, and either start renting it or move into one of the units. The budget proposes to allow a taxpayer to elect that the deemed disposition that normally arises on a change in use of part of a property not apply. This measure will apply to changes in use of property that occur on or after March 19, 2019.