What Do Political Promises Mean for Home Sellers and Buyers in 2022?

"Your overarching goal is to help ensure Canadians can get a home of their own, through work to improve housing affordability and end chronic homelessness.”  

Those were some of the words Justin Trudeau quietly left the Canadian housing minister Ahmed Hussen with before the holidays. In the mandate letter,1 Trudeau put Canadian real estate investors in the hot-seat and proposed many policy changes. This comes after a federal election where the liberals made the promise to ban blind bidding2 and proposed a new Home Buyer’s Bill of Rights.3 With the market moving in a volatile fashion, it’s hard to keep track of the shifting data and trends, let alone the promises of political parties. After sifting through the mountains of information, investors, homeowners, and home seekers are no doubt left with questions.  
 
First, what are the changes and what do these political promises mean for home sellers and buyers in 2022? And more importantly, when will these changes take effect?   

Notable mandates included in Liberal letter to housing minister 

Overall, the mandates seek to work with “provinces, territories, municipalities and the Deputy Prime Minister and Minister of Finance” to develop a “Fairness in Real Estate Action Plan” that includes several mandates. We have included five main mandates affecting home sellers and buyers: 

Mandate 1: “An anti-flipping tax on residential properties, requiring properties to be held for at least 12 months.”

What does this mean for home sellers and buyers?  
Those that are thinking about buying a property as an investment and selling it within 12 months could be affected by a future “anti-flipping tax.” Flippers represent a small segment of the Canadian market, but because they can reduce liquidity, they are one of the focuses of policy reform.  

For those looking for a house for the long term, this tax could help by protecting the interests of home buyers looking to lay down roots.   

Mandate 2: “A temporary ban on foreign buyers of non-recreational residential property in the Canadian housing market.” 

What does this mean for home sellers and buyers?  
A temporary ban on foreign buyers of non-recreational residential property would mean more housing does not sit vacant and unavailable to Canadians. It’s important to note that this applies to properties purchased for recreational purposes, whether it be for hiking, fishing, and may be specifically zoned for “recreational” use. In fact, the Canadian government does not track beneficial ownership, so this policy is mostly for show. According to the Canada Business Corporations Act (CBCA), beneficial ownership is defined as including ownership through any trustee, legal representative, agent or mandatary, or another intermediary. Therefore, without knowing who owns the property, how can they determine what the property is used for?  
 
With interest rates at the floor, at least these preventative measures will place more barriers to entry for foreign investment.

Mandate 3: “Supporting the review of, and possible reforms to, the tax treatment of Real Estate Investment Trusts (REITs).” 

What does this mean for home sellers and buyers?  
REITs4 are organizations that “own, operate, or finance income-generating real estate.” Think of them like mutual funds, accumulating the funds of multiple investors. Canadians can invest in real estate and earn dividends through REITs without having to buy, finance, or manage property. However, these entities are not taxed on their gains in Canada. These loose measures have attracted hordes of organizations towards the lucrative investment.  
 
Proposed reform to REITs might not affect home sellers and buyers directly, but it could provide more space in the market in the long run. 

Mandate 4: “Developing policies to curb excessive profits in investment properties while protecting small independent landlords.” 

What does this mean for home sellers and buyers?  
The trend of limiting real estate investors continues with a policy to curb excessive profits and protecting small independent landlords. While it remains to be seen how this policy will look if it makes it to law, the premise is positive for Canadian home sellers and buyers. It could mean more properties available to homeowners and independent property owners looking to expand.  

Mandate 5: Increased consumer protection and transparency in real estate transactions, including a ban on blind bidding.” 

What does this mean for home sellers and buyers?  
This was the proposal that ignited a media feud in August. Many real estate organizations clapped back at the Canadian government’s proposal saying they were punishing homebuyers and home sellers. Blind bidding in Canada means homebuyers submit a bid without knowing the other offers. Most of the time, the price is driven up because buyers are forced to submit their best offer right out the gate.  

A ban on blind bidding would follow other countries, like Australia, that have more transparency and consumer protection. In theory, it would be great for home buyers and not so great for home sellers.  

When will these changes take effect?  

Unfortunately, in the letter, Trudeau does not outline a specific timeline for these changes to take effect. He does however ask for a speedy response to a plan for implementation. Trudeau states,  

“Ministers must be rigorous and coordinated in our approach to implementation. I would therefore ask that you return to me with a proposed approach for the delivery of your mandate commitments, including priorities for early implementation...I will be asking you to publicly report to me, and all Canadians, on your progress toward these commitments on a regular basis.”  

When Hussen responds with his plan for implementation, we will get a better idea of a timeline for these changes. For now, all we can go by is that Canada’s legislative process involves three parts of Parliament: the House of Commons, the Senate, and the Monarch (Governor-General). It takes time for policy to become law, and these changes could take anywhere from weeks to years to come into effect.  

Looking at the average time it takes to pass a bill, these processes are staying twice as long in the Senate since Prime Minister Trudeau took over. From 2015-to-2019 the length of time, a bill spent in the Senate increased to 31 days from 12 days the four years prior under the Conservative party.5 This number can be even higher depending on the time spent dealing with amendments.  

While bills might not become policy quickly or all at once, we expect the policies that can help with the main concern for the market to be prioritized. That is the supply shortage and pent-up buyer demand across the country.  

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On December 1, 2021, Purplebricks rebranded to FairSquare Group Realty. Blog articles published before this date were created under the Purplebricks brand but remain the property of FairSquare Group Realty.

In January 2019, ComFree Commonsense Network Brokerage rebranded to Purplebricks.