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Backtracking on the housing ban

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EY Canada

Multidisciplinary professional services organization

7 minute read 18 Jul. 2023
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Authored by: Aya Aswad, Associate, EY Law LLP

Housing policy has become a growing focal point for Canadians over the last 20 years as prices rises across the country have made housing less affordable.

In Brief

  • The federal government introduced a two-year ban on the purchase of residential property by anyone who is not a Canadian citizen.
  • However, some have said the legislation makes Canada less competitive in attracting foreign talent.
  • In response to domestic and US pressure, government has loosened the restrictions, allowing non-Canadians to purchase residential property in certain circumstances.

Housing policy has become a growing focal point for Canadians over the last 20 years as prices rises across the country have made housing less affordable.

The rise of inflation outpacing wages has made the issue more difficult still. Politicians are increasingly aware of this issue and have been under pressure to act to moderate this pressure on supply and cost.

A look into the legislative intention

The federal government has long promised to address the hot-button topic of affordable home ownership. On January 1, 2023, the government introduced the Regulations of the Prohibition on the Purchase of Residential Property by Non-Canadians Act. The purpose was to implement a two-year ban on the purchase of residential property by anyone who is not a Canadian citizen, permanent resident of Canada, or a corporation that’s not listed on a stock exchange in Canada and/or controlled by non-Canadians. The intent was to make housing more affordable for Canadians by preventing foreign investors from purchasing residential property when they have no intention for settlement in Canada. The act flowed from an election promise made by the governing Liberal party in the last federal election.

Minister of Housing and Diversity and Inclusion Ahmed Hussen stated: “Through this legislation, we’re taking action to ensure that housing is owned by Canadians, for the benefit of everyone who lives in this country. We will continue to do whatever we can to ensure that all residents of this country have a home that is affordable and that meets their needs.”1

Many Canadians are struggling in their prospects of home ownership due to a tumultuous housing market fueled by steep inflation. The policy intent behind the legislation was to cool the housing market and prevent speculative foreign investors but has attracted a list of critics questioning its purpose since introduced earlier this year.

The Canadian Bar Association prepared a submission to the minister, noting that the law actually makes Canada less competitive in attracting foreign talent.

-… Highly skilled talent is in demand around the world, and Canada competes with other countries to attract highly skilled resources. A policy prohibiting foreign workers from owning a home in Canada for many years after their arrival is counterproductive, may discourage foreign workers and their families from integrating in their community and could leave Canada in an uncompetitive position.

The Canada Employment Relocation Council (CERC) also prepared a submission in response to the act. As highlighted below, CERC believes that the regulations unfairly target foreign nationals.

The proposed regulations unfairly treat foreign nationals with valid work and study visas seeking to immigrate to Canada by prohibiting them from owning a home…. The proposed regulations are creating uncertainty for employers, relocation management companies and, most importantly, employees.

How EY can help

To add to the confusion, in 2020 the Canadian Housing Statistics Program showed that nonresidents only own about 2% to 6% of Canadian residential properties.2 Economists and real estate professionals doubt the legislation will make a significant impact, as nonresident purchases make up such a small number of the overall transactions in the housing market.

 

As Canada grapples with a nationwide labour shortage, in November 2022, the federal government announced aggressive new immigration targets. It has proposed welcoming 465,000 new permanent residents in 2023 and more than 500,000 in 2025.3 The housing act, however, appears to be counter-cyclical to the thrust of this expansion proposal.

 

One of the opinions expressed by critics is the housing ban would cause foreign talent to reconsider establishing their careers and settling in Canada. Immigrants to Canada have expressed their concern. A woman from Shanghai, China, for example, who moved to Canada with her husband and teenaged son, rented a small apartment. "According to this new policy, we can't buy a house until we get permanent residency. This is not good for us," she said. "We have a rental. But for me, there is no sense of belonging".

 

Global reaction

While there are a lot of conversations around this topic in Canada, it has also managed to reach the global stage. The Canadian Real Estate Association has expressed concern that the ban could prompt retaliation by the United States and Mexico to prohibit Canadians from purchasing residential properties in those countries, especially retirees looking for winter homes away from the Canadian winter. Canadians are the largest foreign purchasers of US properties — more than half of properties purchased by Canadians are in Florida and Arizona.

 

The cries of retaliation are already being heard from the United States. US Representative Brian Higgins, a Democrat who represents the border community of Buffalo, New York, said he's prepared to advocate for a new tax on Canadians who own property in the US unless US citizens are offered more exemptions from Ottawa's new underused housing tax, targeting foreign property owners in Canada. This doesn’t appear to be an issue that will die on the ladder, either. Higgins has indicated that he has written a letter to Secretary of State Antony Blinken and has had conversations with the office of US Trade Representative Katherine Tai.

 

The legislative legacy

In an apparent response to domestic and US pressure, on March 29, 2023, the Canadian Government loosened the restrictions, allowing non-Canadians to purchase residential property in certain circumstances. Those who hold a work permit or are authorized to work in Canada under the Immigration and Refugee Protection Regulations and have 183 days or more of validity remaining on their work permit or work authorization at time of purchase can now purchase residential property.

 

These amendments demonstrate that the Government of Canada has recognized the importance of allowing temporary workers in Canada the freedom to enter and participate in the Canadian housing market. The minister, in announcing this change in policy, stated in a press release issued by the CMHC on March 27: “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.”

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organization cannot accept responsibility for loss to any person relying on this article.


Summary

Key takeaways for employers

Employers can address their labor shortages and pursue candidates globally while giving prospective employees a real opportunity to settle and live in Canada. We recommend employers continue these discussions through the following strategies:

  • Consider circulating this update to internal stakeholders, especially your authorized worker population, to build up their understanding of the current status of this issue.
  • Hold a forum to review updates and concerns from your team members on this issue.
  • Gather feedback on the impact of this issue from your authorized worker population and other stakeholders to present to the federal and provincial governments and members of Parliament as to how the proposed and revised approaches to this legislation impact their planning decisions.

This is a welcome amendment to many who dream of home ownership. The broader issue lies with the housing supply and overall affordability. According to CMCH, 22 million housing units will be required by 2030 to help achieve housing affordability for everyone living in Canada.4 To meet the demands of the growing population, the Canadian Government will need to pivot its strategy from demand suppression to a renewed focus on strategies that deliver more housing supply.

Whatever such an approach may be, it must move in tandem with the projected significant increase in Canada’s immigration targets.

About this article

EY
EY Canada
Multidisciplinary professional services organization
Related topics
Workforce
Law

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