Does Budget 2024 make it easier to buy a first home in Canada?

A real estate for sale sign is seen on a house in Kingston, Ontario on Tuesday, April 11, 2023.

The Liberal government’s 2024 federal budget tabled Tuesday held a clear focus on “fairness” among generations and efforts to make the housing market more affordable, particularly for younger Canadians feeling frustrated about their homebuying prospects.

Experts who spoke to Global News after the budget’s release said there are signs of “hope” in the new spending plan’s efforts to improve access to Canada’s often unaffordable housing market.

But Canadians hoping for a leg up to buy their first home will largely be kept waiting, market watchers say, and some measures aimed at improving affordability could inadvertently worsen the situation for prospective buyers.

“I wish I could deliver the message that tomorrow everything is going to be better,” says Paul Kershaw, associate professor at the University of British Columbia and founder of Generation Squeeze.

Kershaw says that the fundamental barrier facing many young people trying to break into the housing market is that Canada has allowed rising home prices to outpace wage growth for “decades.”

Older Canadians have benefited from this wealth accumulation while the younger generation often struggles to get their foot into the market and acquire equity so they, too, can benefit from rising home values, he says.

There’s no quick fix that the federal budget could offer to rebalance these generational divides that he says have been widening for years.

But Kershaw says the 2024 budget nonetheless is a “game-changer,” namely because a federal fiscal document now formally recognizes that these generational differences are now driving class dynamics in Canada.

“A younger demographic is being acknowledged in this budget explicitly that their hard work isn’t paying off as it did for previous generations. And the first step in solving a problem is acknowledging you have one,” Kershaw says.

“I actually have a lot of hope that, going forward, we will make more urgent progress to restore housing affordability and support people to be able to manage their rent and manage their aspirations to break into the ownership markets.”

John Pasalis, president and broker at Realosophy Realty in Toronto, tells Global News that he, too, is encouraged by a lot of the measures included in the budget.

“There are measures, I think, that will take pressure off of price growth, which is going to help affordability in the years ahead. And I think that’s important,” he says.

The federal government proposed some $8.5 billion in new housing initiatives in the 2024 budget amid a promise to get some 3.87 million homes built by 2031.

Pasalis says a return to post-war tax incentives to encourage new purpose-built rental construction will help to stimulate the supply of new rental housing in Canada. Making more federal lands available for developing non-market housing that can offer cheaper rents than traditional units is also a positive development, he says.

These are “long-term policies,” Pasalis notes, and it will take time before renters and home-buying hopefuls see the impact of expanded supply in the market.

Video: Business Matters: Annual home prices predicted to rise nearly 10% in 2024

“It’s not like we’re going to see this flood of new listings or rentals. But at the end of the day, these are important investments to help our housing market over the next five, 10, 15 years,” he says.

Francis Fong, senior economist at TD Bank, told Global News on Tuesday that housing affordability has been a “very difficult nut to crack” for the Liberal government.

He said the federal government’s homebuilding targets are “ambitious,” and will require a pace of construction never before seen in Canada.

Whether Canada is successful in restoring affordability will depend on whether Ottawa can get the provinces and municipalities to come to the table to help get shovels in the ground, Fong said.

“Will it all come together and actually lead to more housing supply, which is ultimately the factor that will lead to better housing affordability? I think the jury’s out at this point,” he said.

“But what I’ve seen so far, I at least will give the government a fighting shot.”

While boosts to housing supply will take upwards of a decade to make an impact on housing market dynamics, Pasalis says there’s “no immediate fix” for Canadians unable to buy a home or qualify for a mortgage today.

“There’s no fast track to housing affordability, unfortunately,” he says.

Among items proposed in the 2024 budget, Pasalis says the move to allow Canadians to withdraw up to $60,000 via the RRSP Home Buyers’ Plan, an increase from $35,000 previously, will help some would-be buyers saving for a down payment.

Video: Federal government increases RRSP withdrawal limit under First Home Buyers’ Plan

Elsewhere in the budget, the Liberals proposed changes to allow first-time homebuyers with an insured mortgage to stretch out their amortizations to 30 years, up from the typical 25, on the purchase of a newly built home. Such a move would reduce the monthly carrying costs of the mortgage but could see homeowners pay more in interest over the lifetime of the loan.

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But Leah Zlatkin, a mortgage broker and expert with lowestrates.ca, said in a release Tuesday that these changes might have a limited impact in the housing market because they only apply to insured mortgages and new builds.

Insured mortgages typically only apply when a homebuyer puts less than 20 per cent of a home’s purchase price down upfront and when the property is valued at less than $1 million.

Developers often require down payments of 20 per cent on newly-built units, Zlatkin notes, which can box out insured mortgage options from the outset. New homes bought in Canada’s most expensive housing markets of Toronto and Vancouver, meanwhile, often come with price tags above $1 million, ruling out insured mortgage options there as well.

Zlatkin added that she has been processing more mortgage pre-approvals in recent months, which could be a sign of rising interest coming to Canada’s spring housing market.

“This will continue to drive prices, especially for newly-built homes,” she said.

Fong said that policies that are designed to bring more people into the housing market — boosting demand — often don’t work to restore affordability because they serve to intensify competition and drive up prices.

“Policies aimed at increasing demand, we’ve seen them before and they don’t work,” he said Tuesday.

“At the end of the day, you have a very large pool of buyers trying to aim their money at a very small pool of housing supply. So we’ve really got to get that supply up.”

The ownership market wasn’t the only area of focus for Ottawa’s housing policies.

Included in Budget 2024 are proposals for a Canadian Renters’ Bill of Rights. The Liberals say funding behind the bill will help to push back against practices such as “renovictions” and give renters a boost in negotiations with landlords by forcing property owners to disclose a unit’s history of rent prices.

The budget also includes a framework for allowing renters to build their credit score using their monthly rent payments in the same way homeowners benefit from paying down their mortgages.

Kershaw said the renters’ bill of rights is “really critical.”

Canadians who are renting face an “uneven playing field” when negotiating with landlords in a tight rental market, he says, and the proposed actions could “empower” renters whether they want to keep leasing or eventually hope to own.

Pasalis is less convinced the supports would move the dial on renters’ frustrations. Knowing a property’s rent history from five years ago won’t help Canadians who are trying to negotiate a lease today, he argues.

“Those are terrible policies. They’re solving problems that don’t exist, quite frankly,” says Pasalis.

“Most renters, their challenge with buying a home is not that their rent is not on their credit score. It’s that rents are too high and home prices are too high.”

Pasalis says that outside the housing market, recently announced federal policies to set targets for the flow of non-permanent residents into Canada could have more of an impact by taking demand out of the market and put less “upward pressure” on rents in the years ahead.