The Government is proposing to provide up to $7.8 billion in tax relief and funding to help stimulate the housing sector and improve housing across Canada.
Social housing provides many Canadians with quality housing at affordable rates. Budget 2009 will invest in social housing by:
Budget 2009 will help local governments meet their needs by:
Canada enjoys a high rate of home ownership among industrialised countries. Our country has a vibrant rental market and a broad network of social housing for those Canadians who need support.
In recent years, Canada’s housing sector has become a key contributor to economic growth by fuelling demand for jobs in construction and trades, building materials and other goods and services.
To bridge Canadians’ desire for quality housing, to stimulate our construction sector, and to enhance energy efficiency, Budget 2009 will provide up to $7.8 billion of funding through tax credits, grants, and loans as well as funding to provinces and territories to help stimulate the housing sector and improve housing across this country.
For many Canadians, owning a home represents both the achievement of a key life goal and the most important investment of their lives. A robust housing sector is also an important source of economic activity in Canada as it promotes demand for labour, building materials and other goods. To provide needed stimulus in these challenging economic times, Budget 2009 proposes four measures to help Canadians purchase and improve their homes.
Home renovations can represent a smart investment in the long-term value of a home and generate broad-based economic activity. They can also reduce energy consumption and the long-term cost of owning a home. To support economic growth during these challenging times, Budget 2009 proposes to introduce a temporary Home Renovation Tax Credit (HRTC).
The HRTC will provide a temporary incentive for Canadians to undertake new renovation projects or accelerate planned future projects, thus providing timely stimulus to the Canadian economy while boosting energy efficiency and the value of Canada’s housing stock.
The proposed HRTC will provide a temporary 15-per-cent income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009. The credit may be claimed for the 2009 taxation year on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, and will provide up to $1,350 in tax relief.
The HRTC will be family-based. For the purpose of the credit, a family will generally be considered to consist of an individual, and where applicable, the individual’s spouse or common-law partner. Family members will be able to share the credit.
The amount eligible for the credit will be based on the total value of eligible expenditures incurred across all eligible dwellings. A dwelling will generally be considered eligible if it is used for personal purposes. This will include a house, a cottage, and a condominium unit.
It is estimated that about 4.6 million families in Canada will benefit from the HRTC.
Benefits of the Temporary Home Renovation Tax Credit—Examples
The following examples illustrate how homeowners can benefit from the HRTC.
1. Sally and Ed are a couple who have recently purchased a house. To take advantage of the temporary HRTC, they decide to replace their windows and improve the insulation in their home in 2009, instead of waiting, incurring $10,000 in expenditures. After taking account of the $1,000 minimum threshold, a 15-per-cent credit will be available on $9,000 in eligible expenditures, providing tax relief of $1,350.
2. William and Marie are a couple who are planning to purchase a more energy-efficient furnace for their home, and build a deck at their cottage sometime later. To take full advantage of the temporary HRTC, they decide to do both projects in 2009 rather than waiting. They pay $5,000 for the furnace and $3,500 for the deck. They also decide to have the area around the deck landscaped for $2,500, bringing their total costs to $11,000 ($5,000 + $3,500 + $2,500). Marie claims a credit of $1,350 on the maximum allowable amount of $9,000. This credit is in addition to the ecoENERGY Retrofit grant that William and Marie expect to receive for installing a more energy-efficient furnace.
3. Karen and Heather are sisters who share ownership of a condominium unit. They each incur $7,500 in expenditures renovating the kitchen in the condominium, in part to provide access for Heather’s wheelchair. Karen and Heather each claim a $975 credit on eligible expenditures of $6,500 ($7,500 – $1,000). This credit is in addition to the Medical Expense Tax Credit that Heather may claim on the portion of expenses eligible for that credit.
It is proposed that the HRTC be claimed for renovations and alterations to a dwelling or the land on which it sits that are enduring in nature. For example, homeowners will be able to claim expenditures for major renovation projects such as finishing a basement, renovating a kitchen, or building an addition. Costs associated with such projects will be eligible for the credit, including permits, professional services, equipment rentals and incidental expenses.
Routine repairs and maintenance normally performed on an annual or more frequent basis (e.g. cleaning, lawn fertilization, and snow removal) will not qualify for the credit. The cost of purchasing furniture, appliances, audio-visual electronics and construction equipment will not be eligible.
Individuals will need to keep receipts for expenditures, and may claim the HRTC when filing their income tax returns for 2009.
Examples of HRTC-Eligible and Ineligible Expenditures
The HRTC will complement support provided by the Government for Canadians to undertake energy-saving improvements to their homes. Federal grants paid through the ecoENERGY Retrofit program will not reduce the value of claims made for these expenditures under the HRTC. Eligible renovation expenditures claimed under the Medical Expense Tax Credit may also be claimed under the HRTC.
The effectiveness of the HRTC will be enhanced to the extent that retailers also encourage homeowners to undertake renovations to their properties.
It is estimated that this measure will cost $500 million in 2008–09 and $2.5 billion in 2009–10.
Promoting energy efficiency and conservation is an effective means of reducing energy demand. The ecoENERGY Retrofit program provides home and property owners with grants of up to $5,000 to offset the costs of making energy-efficiency improvements. Grants apply to a variety of measures that reduce energy consumption from increasing insulation to upgrading a furnace.
Building on the success of the existing program, Budget 2009 provides an additional $300 million over two years to the ecoENERGY Retrofit program to support an estimated 200,000 additional home retrofits.
Saving the down payment for a home can be a challenge for many first-time home buyers.
The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw up to $20,000 from a Registered Retirement Savings Plan (RRSP) to purchase or build a home. Unlike regular RRSP withdrawals, HBP withdrawals are not included in income when withdrawn. Amounts withdrawn under the HBP must be repaid over a 15-year period, starting the second year following the year of the withdrawal, or included in the individual’s income if not repaid.
To provide first-time home buyers with additional access to their RRSP savings to purchase or build a home, Budget 2009 proposes to increase the HBP withdrawal limit to $25,000 from $20,000 in respect of withdrawals made after January 27, 2009. It is also proposed that the increase apply to HBP withdrawals made for the purchase of a more accessible or functional home where the individual making the withdrawal is eligible for the Disability Tax Credit (DTC), or if the withdrawal is made for the benefit of a DTC-eligible person who is related to the individual making the withdrawal. This is the first increase in the withdrawal limit since the HBP was introduced in 1992.
With the $5,000 increase to the withdrawal limit, two first-time home buyers purchasing a home jointly (e.g. a married or common-law couple) with sufficient RRSP funds in each of their names may now together withdraw up to $50,000 from their RRSP funds toward the purchase of a home in Canada.
It is estimated that this measure will cost $15 million in each of 2009–10 and 2010–11.
The costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for first-time home buyers, who must pay these costs on top of saving the money for a down payment.
To assist first-time home buyers with the costs associated with the purchase of a home, Budget 2009 proposes to introduce a First-Time Home Buyers’ Tax Credit—a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief starting in 2009.
It is also proposed that the First-Time Home Buyers’ Tax Credit be made available to existing homeowners in respect of a more accessible or functional home purchased by an individual eligible for the Disability Tax Credit (DTC), or for the benefit of a DTC-eligible person who is related to the individual purchasing the home.
It is estimated that this measure will cost $30 million in 2008–09, $175 million in 2009–10 and $180 million in 2010–11.
Social housing provides many Canadians with quality housing at affordable rates. There are approximately 630,000 social housing units in Canada supported primarily by subsidies from the federal, provincial, territorial, and municipal governments. Most of the housing stock is administered by provinces and territories, with financial support from the federal government. A large portion of the existing units are aging and require significant repair and upgrading to meet modern energy efficiency and accessibility standards.
Budget 2009 provides a one-time federal investment of $1 billion over the next two years to address the backlog in demand for renovation and energy retrofits. Renovation activities will include general improvements, energy efficiency upgrades or conversions, and supports for persons with disabilities. To ensure quick implementation, this new funding will flow through existing agreements and be administered by the Canada Mortgage and Housing Corporation (CMHC) on a 50–50 cost-shared basis with provinces and territories, which are primarily responsible for providing social and low-income housing.
Major investments for low-income Canadians will allow governments to work together to improve the quality and energy efficiency of up to 200,000 social housing units for Canadians that need it most. This $1-billion injection of funds builds on the $1.9-billion investment over five years that the Government announced in September 2008 to extend housing and homelessness programs for low-income Canadians. These programs include the Homelessness Partnering Strategy, the Affordable Housing Initiative, and the suite of housing renovation programs such as the Residential Rehabilitation Assistance Program.
Over the last few years, the Government has made significant investments in improving the financial security and well-being of seniors. The Government recognizes that in these difficult times, however, that low-income seniors may have increased difficulty finding affordable housing.
Budget 2009 will provide $400 million over two years in targeted funding for the construction of housing units for low-income seniors that will be delivered through the Affordable Housing Initiative to be cost-shared with the provinces and territories.
Persons with disabilities often have difficulty finding housing that is suitable for their specific needs.
In recognition of the special housing required by persons with disabilities, Budget 2009 will provide $75 million over two years for the construction of housing units delivered through the Affordable Housing Initiative to be cost shared with the provinces and territories.
The Government of Canada’s primary policy goal for on-reserve housing remains helping First Nations to move toward a private housing sector. In Budget 2007, the Government supported this goal by investing $300 million in the First Nations Market Housing Fund, a credit-enhancement vehicle designed to encourage market-based housing on reserve. While the Government is committed to supporting the development of individual home ownership on reserve, many First Nations continue to face significant need for affordable housing, including social housing.
Budget 2009 provides $400 million over the next two years to support on-reserve housing, dedicated to new social housing projects, remediation of existing social housing stock and to complementary housing activities. These funds will flow through Canada Mortgage and Housing Corporation (CMHC) and Indian and Northern Affairs Canada.
This will assist the transition to market-based housing on reserve and address immediate housing needs while serving as an economic stimulus for many First Nations and rural areas by generating employment, the development of skilled trades and the creation of small businesses.
In recognition of the distinctive needs of the territories, Budget 2009 will provide $200 million over two years in dedicated funding to support the renovation and construction of social housing units. The Yukon and Northwest Territories will receive $50 million each while the remaining $100 million will be allocated to Nunavut, where the need for new social housing is greatest. Funding will be provided to the territories through the Canada Mortgage and Housing Corporation.
Canadian homes need to be supported by a broad range of infrastructure to develop and maintain strong and prosperous communities. The Government understands, however, that much of the responsibility for maintaining the infrastructure of Canadian communities rests with Canadian municipalities.
In recognition of this important responsibility and to address the challenges municipal governments are facing in garnering capital funding for planned "ready to go" projects during an economic slowdown, Budget 2009 will make available up to $2 billion over two years in direct, low-cost loans to municipalities through the Canada Mortgage and Housing Corporation. These low-cost loans will significantly decrease the cost of borrowing for municipalities, and can be used by them to fund their contribution for cost-shared federal infrastructure programming.
This new source of funds will allow municipalities to invest in municipal housing-related infrastructure projects such as sewers, water lines, and neighbourhood regeneration projects, thus contributing to healthier, safer and modern communities for Canadians and their families.
In addition to low-cost loans to municipalities, Budget 2009 also announces a number of major new initiatives that will further accelerate and increase provincial, territorial and municipal infrastructure projects.
|(millions of dollars)|
|Support for Home Ownership
and the Housing Sector
|Home Renovation Tax Credit||500||2,500||3,000|
|Enhancing the Energy Efficiency of Our Homes||150||150||300|
|Increasing withdrawal limits under
the Home Buyers’ Plan
|First-time Home Buyers’ Tax Credit||30||175||180||385|
|Investments in Housing for Canadians|
|Renovation and Retrofit of Social Housing||500||500||1,000|
|Housing for Low-Income Seniors||200||200||400|
|Housing for Persons with Disabilities||25||50||75|
|First Nations Housing||200||200||400|
|Total—Action to Stimulate Housing||530||3,865||1,395||5,790|
|Loans to municipalities||1,000||1,000||2,000|
|Timing of Home Renovation Tax Credit||-500||500||0|
|Total Stimulus Value||6,090||3,145||9,235|
|Notes: Figures in this table are presented on an accrual basis, and therefore, in some cases, will not match the figures contained in the budget text when those are presented on a cash basis. Totals made not add due to rounding.|