The controversial scheme is winding up – and some are welcoming its end
Reaction continues to pour in from across the Canadian mortgage industry following Friday’s news that the federal government is nixing the First-Time Home Buyer Incentive (FTHBI), a much-maligned program to ease affordability for new buyers that saw little uptake across the priciest cities.
Canada Mortgage and Housing Corporation (CMHC) announced last week that it was winding up the scheme, which was aimed at reducing first-time buyers’ monthly mortgage payments through a shared-equity component.
The national housing agency said it would not be accepting new or updated submissions for the incentive past midnight on March 21.
In a statement to Canadian Mortgage Professional, a CMHC spokesperson said the program had been discontinued because the government viewed the First Home Savings Account (FHSA), a tax-free-in, tax-free-out program allowing new buyers to save towards a downpayment, as a more effective means of helping first-time buyers into homes.
“The [FTHBI] was initially expected to sunset in fiscal year 2021-22 but was extended following Budget 2022 to December 31, 2025,” CMHC said. “After a review of federal housing plans in light of the current housing situation, the federal government decided that the [FHSA] is a better tool to help first-time homebuyers buy a home.”
Refocusing the funding would allow the government to focus on other impactful policy areas, the spokesperson added.
Where did the First-Time Home Buyer Incentive go wrong?
The incentive provided a loan of up to 10% of the purchase price of a home to go toward a downpayment, repayable either upon sale of property or after 25 years.
However, an April 2023 evaluation of the report showed that uptake of the program remained rooted well below its stated target of 100,000 users by March 2025 – with only 18,291 successful applicants by the end of 2022.
J.P. Boutros (pictured top), a prominent government relations advisor who was in Ottawa on behalf of Mortgage Professionals Canada (MPC) for the Budget lockup prior to the FHBI’s introduction in 2019, told CMP he had immediately viewed the measure as a “bright shiny object” and a “classic example of a policy designed to make it look like the government was doing something while doing little at all.”
He said the likelihood that the community would be burdened with the IT costs of integrating the untested FHBI into their system was an early red flag, noting that some lenders had reported huge expenditure on the program and criticizing the “untold millions” spent by CMHC to keep it in action.
First-Time Home Buyer Incentive CANCELLED: Guess Gray & His Mom Knew It Was A Crap Program
— Ron Butler (@ronmortgageguy) March 3, 2024
This program was quietly shut down Friday with a tiny note on the CMHC website
$40M or $50M lit on fire for set up & implementation
CMHC did NOT WANT TO DO IT
They knew it was crap
2/ https://t.co/AymB2JxVvg
James Laird, co-chief executive officer of Ratehub.ca and president of the CanWise mortgage lender, said the policy had been “flawed from the beginning” and said he was pleased to see it go.
“It’s a shame that it took them this long to admit the policy failure, but better late than never,” he said. “Allowing all consumers to amortize their mortgage over 30 years has always been a better way to help first-time homebuyers and would be an effective replacement for this program.”
He said the main issues with the scheme were that it required the borrower to stump up the entire minimum downpayment – and slightly reduced the purchase price a buyer could qualify for.
He also criticized the shared-equity component of the scheme. “Even if a homeowner could qualify for the same amount, owning a home with the government still does not make any sense,” he wrote.
“The government gets to enjoy the appreciation of the home, while paying none of the expenses – i.e. property tax, insurance, maintenance.”
Scheme proved more popular in less pricey markets
Ontario and British Columbia – home to Canada’s two priciest housing markets, Toronto and Vancouver – saw muted uptake of the incentive, with just 1,125 applications approved and disbursed in the former and 589 in the latter, according to the housing agency’s evaluation.
However, first-time buyers availed of the option more widely in Quebec (6,037) and Alberta (5,555), whose main markets are already considerably more affordable than in BC and Ontario.
Tara Borle (pictured below), an Edmonton-based broker with Mortgage Architects, told CMP the measure had been a popular one among first-time buyers based in the city, particularly those who were already at or close to their budget limits.
“We used that program a fair bit for clients that were just kind of on the brink of qualifying for what the need. We threw that in there and it kind of bumped them up a little bit,” Borle said.
“I liked that program. We do a fair bit of insured business, that’s why we were able to use that program a lot – and we also deal with new builds, and [buyers] get a 10% incentive with the new build. So I’m sad to see it go.”
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