“Screw You, Millennials” - Budget 2023
Liberals are done pretending to care about housing affordability
After nearly eight years of stringing young Canadians along, of making grand promises then breaking them, the Trudeau Liberals finally decided to not even bother. Budget 2023 nearly entirely ignores the under-40 demographic, announcing exactly zero new initiatives to make housing more affordable.
It’s hard to interpret the omission as anything other than open disdain for the country’s young. The housing crisis is too well publicized for this to be an oversight and even the Liberals can’t be dense enough to think affordability will magically solve itself.
No, this is a party of comfortably housed elites, many of whom reap the benefits of sky-high prices as investors, picking themselves and their peers as economic winners and anyone unlucky enough to be born after the early 1980s, without rich parents, as losers.
In fact, they didn’t simply ignore housing affordability. They introduced and re-committed to measures that will actively make the problem worse.
Their headline promise is to implement the Tax-Free First Home Savings Account (FHSA) first introduced in Budget 2022. The account will combine the downpayment-saving benefits of an RRSP and TFSA by allowing tax-deductible contributions, no capital gains on investment income, and no tax on withdrawals. Individuals can contribute up to $8,000 per year and a lifetime total of $40,000.
The Liberals also updated the FHSA to allow its use in conjunction with the Homebuyer’s Plan (HBP), which allows first-time homebuyers to essentially borrow up to $35,000 from their RRSPs to buy a house.
It’s the sort of Liberal shiny promise that sounds pretty good until you actually take a minute to think it through.
Many young Canadians, who bear the brunt of inflation, wage stagnation, and the cost-of-living crisis, can’t afford to dedicate $8,000 of income per year to an FHSA, let alone even more thousands to an RRSP. If this account benefits anyone, it will only be the highest earners.
This is all before we even get to the obvious downside of policies that stoke demand and support high price floors. The FHSA, now with the added power of the HBP, will prop up unsustainable prices, encourage high levels of mortgage debt, and once again protect homeowners’ lottery-like gains at the expense of future generations.
Budget 2023 also introduces a Code of Conduct to Protect Canadians With Existing Mortgages. Due to “exceptional circumstances” (here is where I note interest rates are nowhere near historical highs), the Liberals will direct financial institutions to provide “relief measures” that include adjusting payment schedules, authorizing lump-sum payments, and, most egregiously, extending amortizations past 25 years.
This is a regulatory bailout that’s disturbingly broad. There’s no requirement these measures be offered to only owners of primary residences, so they will largely end up protecting overextended investors and house flippers.
While the Liberals claim to be against the financialization of housing, it’s anti-free market policies like these that make investing in housing so attractive to begin with.
Sandwiched between Biden and Budget headlines this week, Liberals also announced they’ll add further loopholes to their already porous-as-a-sponge foreign buyers’ ban, and the CRA declared they’ll waive late fees and interest on the Underused Housing Tax, which requires non-resident foreigners to pay a measly one per cent on the value of property they leave vacant.
It’s pretty clear at this point the Liberals aren’t just not for affordable housing, they’re anti-affordable housing while assuming millennials and Gen Z are too naive to notice. There’s simply no other way to interpret the insurmountable gap between their rhetoric and what’s actually in the pages of Budget 2023.
Edit: This column originally stated the $8,000 per year FHSA contribution limit couldn’t be carried forward. Updated legislation now allows it to be carried forward for one year. It can also now be used alongside the HBP.