Ottawa amends foreign homebuyer ban to boost housing supply growth

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Millicent Wong
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financial post

  1. property

Changes by the Housing Secretary will allow non-Canadians to purchase residential property in certain circumstances

Published on March 29, 2023 • Last updated on March 30, 2023 • 3 minutes read

Framework for a new home The ban on overseas homebuyers has been amended to ease some restrictions on purchases. Photo by Getty Images/iStockphoto

The federal housing minister has made changes to the rules on home ownership by foreigners, saying the move will bring more Flexibility for newcomers and companies looking to expand Canada’s housing supply.

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The government announced the changes on March 27, including raising the foreign control threshold for companies and allowing those with work permits to buy their own homes.

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“These changes will further support individuals and families looking to build a life in Canada by pursuing homeownership in their communities earlier and by addressing housing supply issues,” the government said in a press release.

The Ban on foreign homebuyers, which went into effect on January 1, barred non-Canadians from buying a home, either directly or indirectly, for two years. The ban carries the potential for $10,000 in fines for violators.

Officially known as the Prohibition on the Purchase of Residential Property by Non-Canadians Act, the ban was intended to take some pressure off house prices amid an affordability crisis fueled by the rising cost of living caused by inflation and higher interest rates was exacerbated.

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The rule changes, which went into effect on March 27, will expand the exemptions to allow non-Canadians to purchase a residential property in certain circumstances, the government said.

“These changes strike the right balance to ensure housing is used for the people living in Canada and not as a speculative investment by foreign investors,” said Ahmed Hussen, Minister for Housing and Diversity and Inclusion.

One of the changes introduced will allow people who have a work permit or who are permitted to work in Canada to purchase homes while working here.

Work permit holders who have not purchased more than one residential property are now eligible if their work permit or work permit has at least 183 days remaining at the time of purchase, it said. This will repeal the current regulations on tax returns and prior work experience in Canada.

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The previous regulation on brownfield sites will also be lifted and the ban no longer applies to all areas with residential and mixed use. This means non-Canadians can now purchase vacant land designated for residential and mixed-use use for any purpose, including residential development.

There will also be an exception allowing non-Canadians to purchase homes for development purposes. This also extends the current exemption for publicly traded companies to publicly traded companies incorporated under the laws of Canada or a province and controlled by a non-Canadian.

Finally, the threshold for foreign control of companies was raised from 3% to 10%. This applies to private companies or individuals incorporated under the laws of Canada or a province controlled by a non-Canadian. The government said this aligns with the definition of a “specified Canadian company” in the Underused Housing Tax Act.

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Mortgage expert Rob McLister said the ban on foreign buyers came into effect impulsively and without due consideration and is unlikely to affect housing affordability, given the long list of exceptions and low foreign ownership.

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“This whole ban is so patchy and illogical that its political impetus couldn’t be more transparent,” McLister said, adding that policymakers should incentivize construction enough to “accommodate the hundreds of thousands of immigrants they keep coming back to.” introduce”.

Correction: A previous version of this article stated that the CMHC made the changes when it was actually the Federal Department of Housing. The Financial Post regrets the error.

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