Nearly halfway through a three-year program to help first-time homebuyers, far fewer Canadians have taken advantage of it than what the government budgeted for.
Figures tabled in Parliament on Monday show that, as of Jan. 31, only 9,108 approved applicants had received the First-Time Home Buyer Incentive, which is in the form of a shared-equity mortgage.
Just $170 million has been disbursed in incentives, out of $1.25 billion the three-year program is worth. It began on Sept. 1, 2019, and is run by the Canada Mortgage and Housing Corporation.
If the program exhausted all its funding by the end of Year 3, it would help 100,000 Canadian families become homeowners, said federal officials in 2019.
The incentive is meant to help first-time homebuyers reduce their monthly mortgage payments. Applicants who qualify can borrow five or 10 per cent of the purchase price of a home to put toward a down payment.
Housing experts have said the low take-up of the program is because its eligibility rules don’t reflect skyrocketing house prices in Canada’s big cities.
The maximum home price eligible for the incentive is equal to four times the homebuyer’s income, with income capped at $120,000.
In an effort to increase access to homes in major cities, Ottawa announced in last November’s fall economic statement that it was changing the rules for homes in Toronto, Vancouver, and Victoria’s census metropolitan areas.
Instead of four times household income, the threshold increased this spring to 4.5 times household income, while the buyer’s income threshold was raised to $150,000. As a result, the maximum eligible home price in those three markets increased from $505,000 to $720,000.
But the changes may not have the desired effect, because home prices have risen dramatically during the pandemic.
More than 70,000 homes were sold in March, surpassing the previous record for the month by 22,000 purchases, the Canadian Real Estate Association said Thursday.
The average selling price of a Canadian home sold on the association’s MLS system was $716.828, up by 31.6 per cent in a year.
For the first time, the average selling price of a home in the Greater Toronto Area is now over $1 million, the Toronto Regional Real Estate Board said last month.
The dramatic increase in prices and sales has raised concerns that younger Canadians are being left out of homeownership, and that Canada’s housing market is overheated.
Last week, Canada’s banking regulator proposed raising the level of the mortgage stress test to ensure borrowers can afford higher rates, a move that would reduce the purchasing power of buyers by about five per cent.
Ottawa is watching the housing market “very closely,” and recognizes that rising prices have made it hard for many young Canadians to buy a home, Finance Minister Chrystia Freeland said late last month.
In a statement, Social Development Minister Ahmed Hussen’s office said Ottawa is making it easier for Canadians to afford a home by making the recent changes to the incentive, and by planning to spend $70 billion on a national housing strategy.
The homebuyer program will be “subject to a formal evaluation in due time,” said Mikaela Harrison, Hussen’s press secretary.
Only 85 applications have been submitted for Toronto mortgages through the homebuyer incentive, and only 44 were approved, according to the tabled data.
That’s fewer than the applications in St. John’s, N.L., for example, which had 89, of which 67 were approved.
Among Canadian cities, the program was most popular in Edmonton, which had 1,839 applications, 1,399 of them approved.