As Canadians face a cost of living crunch, tackling housing affordability is going to be a main feature of Thursday’s federal budget, CTV News has learned.
From moving to make it illegal for foreigners to buy any residential properties in Canada for the next two years, to rolling out a tax-free savings account for first-time buyers, the government is looking to make good on a series of 2021 Liberal campaign commitments in the 2022 budget.
Coming at a time of considerable economic and international instability, Deputy Prime Minister and Finance Minister Chrystia Freeland appears to have focused considerably in this budget on what the government can do to counter the housing crunch, the lack of inventory, and the skyrocketing prices.
While spending an estimated $10 billion over the next five years on the overall housing package, the government will also be implementing new policies meant to help increase the inventory and help those being dramatically outbid, including shutting foreign buyers out of the market.
The foreign buyers ban will apply to condos, apartments, and single residential units. Permanent residents, foreign workers, and students will be excluded from this new measure. Foreigners who are purchasing their primary residence here in Canada will be exempt.
The policy change will be legislated, giving the government powers to prescribe penalties and potential judicial powers to address instances of non-compliance, according to a government source. There is no cost attached to this foreign buyers measure yet.
Among the several housing-focused promises in the party’s platform, the Liberals promised to work with the provinces and territories “to better regulate the role of foreign buyers in the Canadian housing market.”
In the budget, the Liberals will also be moving to implement a new “Tax-Free First Home Savings Account” that, if it mirrors the Liberal platform promise, will allow Canadians under 40 to save up to $40,000 towards their first home.
With the aim of shortening the time it’ll take to afford a down payment, first-time home buyers would be able to withdraw this money tax-free to put towards their first home purchase, with no requirement to repay it, per the Liberal platform.
Also included in the sizable housing section of Thursday’s budget will be:
$4 billion to help municipalities update their zoning and permit systems to allow for speedier construction of residential properties;
$1 billion for the construction of affordable housing units; and
$1.5 billion in loans and funding for co-op housing.
The $4 billion for municipalities appears to be addressing one of the housing elements from the Liberal-NDP deal. The confidence-and-supply agreement included a pledge to move ahead with “launching a Housing Accelerator Fund.”
This is in reference to a Liberal platform commitment, which is meant to incentivize housing construction by cutting red tape and building other digitized systems related to municipal planning, zoning and permitting systems.
It remains unclear how many housing units will be created under these spending measures.
“The objective is to keep houses in Canada for Canadians,” said a government official speaking to CTV News on a not-for-attribution basis.
$8B FOR DEFENCE AMID PRESSURE
As allied countries face continued pressure to respond to Russia’s deadly and destructive attacks on Ukraine, while shoring up North American defence systems, the federal budget is set to include increased defence spending.
CTV News has confirmed that the Department of National Defence’s budget will be increased, by approximately $8 billion, but it won’t be allocated all in one year.
The push to considerably increase defence spending was given an eleventh-hour but not accounting-alerting nudge on Wednesday, when the House of Commons passed a Conservative motion calling for the government to “at least” meet the NATO spending target.
House calls for Canada to meet NATO defence spending target on eve of budget
This coming military spending increase alone will not satisfy those pushing Canada to fulfill their NATO commitment to spend two per cent of its gross domestic product (GDP) on defence, setting the Liberals up for an interesting political conversation post-budget.
In order to reach two per cent—Canada spent 1.36 per cent of its GDP last year according to the latest figures—the Parliamentary Budget Officer has estimated the government would have to set aside between $20 to $25 billion per year.
It’s not the only element of the budget in which the Liberals are facing pressure from other parties. Freeland’s second budget, and the first since the last federal election sent Prime Minister Justin Trudeau back to Ottawa with another minority government, has also had to factor in a series of considerations outside of what they campaigned on.
From contending with the Conservatives’ focus on the rising cost of living and recently record high inflation rates, to this newly inked confidence-and-supply agreement with the NDP, the Liberals are being called to spend more while also tamping down on “excessive government spending.”
Among what New Democrats are looking for from Freeland: The first phase of a national dental care program; potentially more money to further develop a national pharmacare program; more funding to address pandemic-related strains on the health-care system; and further climate change measures.
RAISING REVNUES, ADDRESSING DEFICIT
In addition to outlining new plans to spend taxpayer money, Thursday’s budget will also include measures meant to increase government revenues.
One way CTV News has learned this will be done, is through a surtax on financial institutions that have made huge profits during the pandemic. In being asked to share their wealth, the big chartered banks and major insurance companies will see their corporate income taxes increased. How much more they will have to pay, is set to be detailed in the budget.
In their 2021 election platform, the Liberals vowed to slap a three per cent surtax on banks and insurers who earned more than $1 billion per year. The Liberals estimated that the surtax would bring in approximately $1.2 billion a year, totalling $3.6 billion over the next three years, which alone would only cover a fraction of the coming new expenses.
Federal budget set to include surtax on big banks’ pandemic profits
While the government is looking back at bank’s pandemic earnings, the COVID-19 crisis is not in the rearview mirror yet.
After the last federal budget saw the government spend tens of billions trying to stimulate Canada’s economic rebuild, this budget is being presented as the country appears to be in the midst of another surge in cases.
As of the December 2021 fiscal update, the government was projecting a deficit of $58.4 billion in 2022-23, declining each year after. Recent economic growth and higher oil prices may help pad the government’s balance sheet, but by how much remains to be seen.
Since abandoning their pledge years ago to not run deficits over $10 billion and return to balance by 2019, the Liberals have yet to present a budget that includes a path towards that goal. Instead, they’ve repeatedly pointed to Canada’s debt-to-GDP ratio—which measures the size of the deficit in relation to the economy—as a key economic indicator.
Asked by reporters on Parliament Hill on Wednesday what metrics will be used to determine fiscal responsibility, Trudeau said continuing to have a declining debt as a proportion of the economy remains a “core” fiscal anchor.
Trudeau said the budget will be “ focused on doing the things that Canada needs, investing in Canadians, supporting people with the cost of living, and remaining fiscally responsible and building for the future.”
