CMHC amends ‘illogical’ foreign homebuyer ban to help boost housing supply growth
Denise Paglinawan
Financial Post
Changes will allow non-Canadians to purchase a residential property in certain circumstances
Changes have been made to the foreign homebuyer ban to ease some restrictions on purchasing. Photo by Getty Images/iStockphoto
The federal housing minister has made amendments to regulations on foreign purchases of residential property, saying the move will give more flexibility to newcomers and businesses looking to add to Canada’s housing supply.
The Canada Mortgage and Housing Corporation on March 27 announced the changes, which include increasing the corporation foreign control threshold and enabling those with work permits to purchase a home.
“These amendments will further support individuals and families seeking to build a life in Canada by pursuing home ownership in their communities sooner and address housing supply issues,” the CMHC said in a press release.
The foreign homebuyer ban, which took effect on Jan. 1, blocks non-Canadians from buying residential property — either directly or indirectly — for two years. The ban carries the potential for $10,000 fines for violations.
Officially known as the Prohibition on the Purchase of Residential Property by Non-Canadians Act, the ban was meant to take some pressure off home prices amid an affordability crisis only made worse by the rising cost of living brought on by inflation and elevated interest rates.
The changes to the regulations, which came into force on March 27, will expand exceptions to allow non-Canadians to purchase a residential property in certain circumstances, the government said.
“These amendments strike the right balance in ensuring that housing is used to house those living in Canada, rather than a speculative investment by foreign investors,” said Ahmed Hussen, Minister of Housing and Diversity and Inclusion.
One of the amendments introduced will allow those holding a work permit or who are authorized to work in Canada to purchase residential property while working here.
Work permit holders who have not purchased more than one residential property are now eligible if they have 183 days or more of validity remaining on their work permit or work authorization at time of purchase, it said. This will repeal current provisions on tax filings and previous work experience in Canada.
The existing provision on vacant land will also be repealed and the ban will no longer apply to all lands zoned for residential and mixed use. This means non-Canadians can now purchase vacant land zoned for residential and mixed use for any purpose, including residential development.
There will also be an exception allowing non-Canadians to purchase residential property for the purpose of development. This also extends the exception currently applicable to publicly traded corporations to publicly traded entities formed under the laws of Canada or a province and controlled by a non-Canadian, the CMHC said.
Lastly, the threshold of corporation foreign control has been increased to 10 per cent from from three per cent. This applies to privately held corporations or privately held entities formed under the laws of Canada or a province and controlled by a non-Canadian. The government said this aligns with the definition of “specified Canadian Corporation” in the Underused Housing Tax Act.
Mortgage expert Rob McLister said the foreign buyer ban was impulsively rushed into law without due consideration and will barely move the needle on housing affordability, with the long list of exceptions and low foreign ownership to begin with.
“This whole ban is so loop-holed and illogical that its political impetus could not be more transparent,” McLister said, adding that policymakers should incentivize enough construction to house “the hundreds of thousands of immigrants they keep ushering in.”
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