CMHC Discontinues First-Time Homebuyer Incentive Program Amid Criticisms: A Closer Look at the Unraveling Initiative
Canada's housing landscape is undergoing a significant change as the Canada Mortgage and Housing Corp. (CMHC) announces the discontinuation of its first-time homebuyer incentive program. The move comes in response to widespread criticism that characterized the initiative as ineffective and nonsensical.
In a notice posted on its website, CMHC declared that the program would no longer accept new or updated submissions after midnight Eastern Time on March 21. The core concept of the initiative involved the government taking partial ownership of properties to assist first-time homebuyers. Under the program, the government provided a loan equivalent to five or 10 percent of the purchase price, aiming to augment the down payment and subsequently reduce monthly mortgage payments.
However, the program faced numerous challenges, particularly related to eligibility criteria. Issues such as restrictions on household income and mortgage size hampered its effectiveness. The total borrower income cap was set at $120,000, with exceptions for $150,000 in high-cost areas like Toronto, Vancouver, or Victoria. Additionally, total borrowing was capped at four times the qualifying income, or 4.5 times in the aforementioned expensive cities.
Critics, including James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender, argued that the program failed to address the fundamental issue of assisting buyers in assembling a minimum down payment. Laird emphasized that the convoluted eligibility criteria resulted in some borrowers qualifying for smaller amounts than they otherwise would have.
Laird went further, expressing dissatisfaction with the government-ownership component, deeming the program poorly thought out. He criticized the decision-making process, stating, "It was literally like they sat in a room by themselves, without anyone who understood the industry, and just made up a bunch of stuff that made no sense."
Despite the discontinuation of the first-time homebuyer incentive, the Canadian government continues to support first-time buyers through the backing of uninsured mortgages. Laird suggested alternative measures, such as allowing amortizations to stretch out over 30 years, as a more straightforward way to aid homebuyers without the complexities of co-ownership agreements.
CMHC, as of the end of 2022, had committed $329 million to approximately 18,500 applications out of the initial $1.25-billion commitment made at the program's launch in 2019. The decision to terminate the initiative reflects a shift in approach, responding to criticisms and aiming for more effective solutions in supporting first-time homebuyers.
This report by The Canadian Press was first published on March 1, 2024, highlighting the changing landscape of government-backed programs in the Canadian housing market.
