The Home Buyers’ Plan (HBP) is a federal program that makes getting a first home easier. Under the HBP, anyone can withdraw money from their RRSP to help purchase or build a qualifying first home, either for themselves or a disabled relative.
Each year, the home buyer must pay back to their RRSP a portion of the withdrawn amount. Generally, the full amount must be repaid within 15 years.
THE BENEFITS OF THE HBP
The HBP makes home ownership more affordable. Money withdrawn through the HBP essentially serves as a repayable, zero-interest self-loan. This can reduce or eliminate the need for costly mortgage insurance and reduce the amount of interest paid to lenders.
THE ISSUE
Canadians and their families face sudden life changes that can affect their ability to maintain homeownership. Job relocation, the death of a spouse, marital breakdown or the decision to accommodate an elderly relative may all compromise their housing security.
CREA’S PROPOSAL
We recommend the Home Buyers’ Plan (HBP) be extended to help Canadians maintain homeownership through significant life changes. These life changes can sometimes impact the ability for Canadians and their families to maintain homeownership.
1. Eases Affordability Concerns
Helping Canadians who relocate for work by letting them use the HBP allows for labour mobility by easing affordability concerns. Jobs are the foundation of a strong economy and the price of housing should not serve as a barrier to relocate for employment.
Currently, seniors account for nearly 15% of the population. By 2036, Statistics Canada projects they will account for approximately 25% of the total population. A family’s choice to accommodate an elderly family member in their home should not be restricted by affordability concerns when the HBP could offer needed assistance.
In 2015, 47,699 Canadians became widowed and 23,397 went through a marital breakdown. These individuals may require support to maintain housing through this disruptive and often difficult period of change.
2. Strengthen a Critical Principal
The HBP already allows for use on more than one occasion as a result of a major life change. Individuals requiring new housing as a result of becoming disabled can use the HBP, as can those who have been out of the housing market for more than five years.
3. Fiscally Conscious
The HBP allows Canadians to borrow from their savings. Unlike a costly tax credit, the HBP effectively amounts to a zero-interest self-loan. Furthermore, the HBP is not a cost unto itself. Costs are attributable to Canadians contributing more to their RRSPs in the year of a home purchase in order to take advantage of the HBP.
