Amid widespread affordability concerns in Canada’s housing market, the Canada Mortgage and Housing Corporation (CMHC) announced a series of amendments to its foreign buyer ban.
A total of four amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Act were announced in a news release Monday by Ahmed Hussen, the minister of housing and diversity and inclusion.
“These amendments will allow newcomers to put down roots in Canada through home ownership and businesses to create jobs and build homes by adding to the housing supply in Canadian cities,” Hussen said in the release.
The amendments include increasing the corporate foreign control threshold, providing an exception for development, and repealing legislation to not apply to vacant land or work permit holders.
Kevin Lee, the chief executive officer of the Canadian Home Builders' Association (CHBA), said in a phone interview Tuesday that the previous regulations were having the unintended effect of impeding development. He said development needs to continue to address supply-related issues.
However, Lee said the most recent amendments have largely “corrected the situation.”
“Those changes were critical and we have been heavily engaged as an association ever since the regulations were published on Dec. 21, 2022. They really did affect the capacity of industry to operate,” Lee said, adding that the initial regulation targeted residential real estate but also impacted commercial real estate.
According to the CMHC release, the corporate foreign control threshold was increased from three per cent to 10 per cent.
“A particular interest to us is the ability now to purchase property, irrespective of the ownership structure of an entity, so that you can in fact, buy property for development. The intent of the act was not to prevent that, but the way the regulations were written, it did effect that,” Lee said, adding that it was an important change.
CHBA said in a release on Feb. 7, 2023, that the three per cent threshold impeded developers with partial foreign ownership.
“If you are a REIT [real estate investment trust] purchasing property for development, many of them do, now you don’t have that issue anymore I don’t think.”
Additionally, under the new rules, the release said there is now an exception in place for development purposes, which makes it possible for non-Canadians to acquire residential property for development.
The exception for development purposes will also extend an existing exception that applies to publicly traded companies.
“The amendments also extend the exception currently applicable to publicly traded corporations under the Act, to publicly traded entities formed under the laws of Canada or a province and controlled by a non-Canadian,” the release said.
Under the new amendments, the foreign buyer ban will no longer apply to vacant land. According to the release, non-Canadians will now be able to acquire vacant land that is zoned for residential or mixed-use.
“The main thing was the idea of changing it so that you can, [when] you're purchasing for development, no matter what is on the property, vacant or one building or two houses or whatever, as long as you can go ahead and pursue development, that was the big thing to change,” Lee said.
Lastly, the amendment to Canada’s foreign buyer bank will allow those holding a work permit in the country to purchase residential property. Permit holders will be eligible if they have at least 183 days of validity remaining on their permit when they acquire the property.
“These amendments strike the right balance in ensuring that housing is used to house those living in Canada, rather than a speculative investment by foreign investors,” Hussen said in the release.
The Prohibition on the Purchase of Residential Property by Non-Canadians Act initially came into effect Jan. 1, 2023, and was put in place to increase housing affordability in Canada, the release said. The amendments to the legislation came into effect on Mar 27, 2023.