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The Government is proposing to provide up to $7.8 billion in tax relief and funding to help stimulate the housing sector and improve housing across Canada.

Support for Home Ownership and the Housing Sector

• Implementing a temporary Home Renovation Tax Credit that will provide up to $1,350 in tax relief, reduce the cost of renovations for an estimated 4.6 million Canadian families, and provide needed stimulus to the economy.
• Providing an additional $300 million over two years to the ecoENERGY Retrofit program to support an estimated 200,000 additional home retrofits.
• Providing first-time home buyers with additional access to their Registered Retirement Savings Plan savings to purchase or build a home by increasing the Home Buyers’ Plan withdrawal limit to $25,000 from $20,000.
• Assisting first-time home buyers by providing up to $750 in tax relief to help with the purchase of a first home.

Investments in Housing for Canadians

Social housing provides many Canadians with quality housing at affordable rates. Budget 2009 will invest in social housing by:

• Providing a one-time federal investment of $1 billion over two years for renovations and energy retrofits for up to 200,000 social housing units on a 50–50 cost-shared basis with provinces.
• Investing $400 million over two years for the construction of social housing units for low-income seniors.
• Investing $75 million over two years for the construction of social housing units for persons with disabilities.
• Dedicating $400 million over two years to new social housing projects and to remediation of existing social housing stock on First Nations reserves.
• Supporting social housing in the North with an additional $200 million over two years.

Helping Municipalities Build Stronger Communities

Budget 2009 will help local governments meet their needs by:

• Making available up to $2 billion over two years in direct, low-cost loans to municipalities to finance improvements to housing related infrastructure, such as sewers, water lines, and neighbourhood regeneration projects. Municipalities will also have access to significant new funding available under major new provincial, territorial and municipal infrastructure initiatives.

Introduction

Canada enjoys a high rate of home ownership among industrialised countries. Our country has a vibrant rental market and a broad network of social housing for those Canadians who need support.

In recent years, Canada’s housing sector has become a key contributor to economic growth by fuelling demand for jobs in construction and trades, building materials and other goods and services.

To bridge Canadians’ desire for quality housing, to stimulate our construction sector, and to enhance energy efficiency, Budget 2009 will provide up to $7.8 billion of funding through tax credits, grants, and loans as well as funding to provinces and territories to help stimulate the housing sector and improve housing across this country.

Support for Home Ownership and the Housing Sector

For many Canadians, owning a home represents both the achievement of a key life goal and the most important investment of their lives. A robust housing sector is also an important source of economic activity in Canada as it promotes demand for labour, building materials and other goods. To provide needed stimulus in these challenging economic times, Budget 2009 proposes four measures to help Canadians purchase and improve their homes.

Home Renovation Tax Credit

Home renovations can represent a smart investment in the long-term value of a home and generate broad-based economic activity. They can also reduce energy consumption and the long-term cost of owning a home. To support economic growth during these challenging times, Budget 2009 proposes to introduce a temporary Home Renovation Tax Credit (HRTC).

The HRTC will provide a temporary incentive for Canadians to undertake new renovation projects or accelerate planned future projects, thus providing timely stimulus to the Canadian economy while boosting energy efficiency and the value of Canada’s housing stock.

How the Temporary HRTC Will Work

The proposed HRTC will provide a temporary 15-per-cent income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009. The credit may be claimed for the 2009 taxation year on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, and will provide up to $1,350 in tax relief.

Who Can Claim the HRTC

The HRTC will be family-based. For the purpose of the credit, a family will generally be considered to consist of an individual, and where applicable, the individual’s spouse or common-law partner. Family members will be able to share the credit.

The amount eligible for the credit will be based on the total value of eligible expenditures incurred across all eligible dwellings. A dwelling will generally be considered eligible if it is used for personal purposes. This will include a house, a cottage, and a condominium unit.

It is estimated that about 4.6 million families in Canada will benefit from the HRTC.

Expenditures Eligible for the HRTC

It is proposed that the HRTC be claimed for renovations and alterations to a dwelling or the land on which it sits that are enduring in nature. For example, homeowners will be able to claim expenditures for major renovation projects such as finishing a basement, renovating a kitchen, or building an addition. Costs associated with such projects will be eligible for the credit, including permits, professional services, equipment rentals and incidental expenses.

Routine repairs and maintenance normally performed on an annual or more frequent basis (e.g. cleaning, lawn fertilization, and snow removal) will not qualify for the credit. The cost of purchasing furniture, appliances, audio-visual electronics and construction equipment will not be eligible.

Individuals will need to keep receipts for expenditures, and may claim the HRTC when filing their income tax returns for 2009.

The HRTC will complement support provided by the Government for Canadians to undertake energy-saving improvements to their homes. Federal grants paid through the ecoENERGY Retrofit program will not reduce the value of claims made for these expenditures under the HRTC. Eligible renovation expenditures claimed under the Medical Expense Tax Credit may also be claimed under the HRTC.

The effectiveness of the HRTC will be enhanced to the extent that retailers also encourage homeowners to undertake renovations to their properties.

It is estimated that this measure will cost $500 million in 2008–09 and $2.5 billion in 2009–10.

Enhancing the Energy Efficiency of Our Homes

Promoting energy efficiency and conservation is an effective means of reducing energy demand. The ecoENERGY Retrofit program provides home and property owners with grants of up to $5,000 to offset the costs of making energy-efficiency improvements. Grants apply to a variety of measures that reduce energy consumption from increasing insulation to upgrading a furnace.

Building on the success of the existing program, Budget 2009 provides an additional $300 million over two years to the ecoENERGY Retrofit program to support an estimated 200,000 additional home retrofits.

Increasing Withdrawal Limits Under the Home Buyers’ Plan

Saving the down payment for a home can be a challenge for many first-time home buyers.

The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw up to $20,000 from a Registered Retirement Savings Plan (RRSP) to purchase or build a home. Unlike regular RRSP withdrawals, HBP withdrawals are not included in income when withdrawn. Amounts withdrawn under the HBP must be repaid over a 15-year period, starting the second year following the year of the withdrawal, or included in the individual’s income if not repaid.

To provide first-time home buyers with additional access to their RRSP savings to purchase or build a home, Budget 2009 proposes to increase the HBP withdrawal limit to $25,000 from $20,000 in respect of withdrawals made after January 27, 2009. It is also proposed that the increase apply to HBP withdrawals made for the purchase of a more accessible or functional home where the individual making the withdrawal is eligible for the Disability Tax Credit (DTC), or if the withdrawal is made for the benefit of a DTC-eligible person who is related to the individual making the withdrawal. This is the first increase in the withdrawal limit since the HBP was introduced in 1992.

With the $5,000 increase to the withdrawal limit, two first-time home buyers purchasing a home jointly (e.g. a married or common-law couple) with sufficient RRSP funds in each of their names may now together withdraw up to $50,000 from their RRSP funds toward the purchase of a home in Canada.

It is estimated that this measure will cost $15 million in each of 2009–10 and 2010–11.

First-Time Home Buyers’ Tax Credit

The costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for first-time home buyers, who must pay these costs on top of saving the money for a down payment.

To assist first-time home buyers with the costs associated with the purchase of a home, Budget 2009 proposes to introduce a First-Time Home Buyers’ Tax Credit—a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief starting in 2009.

It is also proposed that the First-Time Home Buyers’ Tax Credit be made available to existing homeowners in respect of a more accessible or functional home purchased by an individual eligible for the Disability Tax Credit (DTC), or for the benefit of a DTC-eligible person who is related to the individual purchasing the home.

It is estimated that this measure will cost $30 million in 2008–09, $175 million in 2009–10 and $180 million in 2010–11.

Investments in Housing for Canadians

Renovation and Retrofit of Social Housing

Social housing provides many Canadians with quality housing at affordable rates. There are approximately 630,000 social housing units in Canada supported primarily by subsidies from the federal, provincial, territorial, and municipal governments. Most of the housing stock is administered by provinces and territories, with financial support from the federal government. A large portion of the existing units are aging and require significant repair and upgrading to meet modern energy efficiency and accessibility standards.

Budget 2009 provides a one-time federal investment of $1 billion over the next two years to address the backlog in demand for renovation and energy retrofits. Renovation activities will include general improvements, energy efficiency upgrades or conversions, and supports for persons with disabilities. To ensure quick implementation, this new funding will flow through existing agreements and be administered by the Canada Mortgage and Housing Corporation (CMHC) on a 50–50 cost-shared basis with provinces and territories, which are primarily responsible for providing social and low-income housing.

Major investments for low-income Canadians will allow governments to work together to improve the quality and energy efficiency of up to 200,000 social housing units for Canadians that need it most. This $1-billion injection of funds builds on the $1.9-billion investment over five years that the Government announced in September 2008 to extend housing and homelessness programs for low-income Canadians. These programs include the Homelessness Partnering Strategy, the Affordable Housing Initiative, and the suite of housing renovation programs such as the Residential Rehabilitation Assistance Program.

Housing for Low-Income Seniors

Over the last few years, the Government has made significant investments in improving the financial security and well-being of seniors. The Government recognizes that in these difficult times, however, that low-income seniors may have increased difficulty finding affordable housing.

Budget 2009 will provide $400 million over two years in targeted funding for the construction of housing units for low-income seniors that will be delivered through the Affordable Housing Initiative to be cost-shared with the provinces and territories.

Housing for Persons With Disabilities

Persons with disabilities often have difficulty finding housing that is suitable for their specific needs.

In recognition of the special housing required by persons with disabilities, Budget 2009 will provide $75 million over two years for the construction of housing units delivered through the Affordable Housing Initiative to be cost shared with the provinces and territories.

First Nations Housing

The Government of Canada’s primary policy goal for on-reserve housing remains helping First Nations to move toward a private housing sector. In Budget 2007, the Government supported this goal by investing $300 million in the First Nations Market Housing Fund, a credit-enhancement vehicle designed to encourage market-based housing on reserve. While the Government is committed to supporting the development of individual home ownership on reserve, many First Nations continue to face significant need for affordable housing, including social housing.

Budget 2009 provides $400 million over the next two years to support on-reserve housing, dedicated to new social housing projects, remediation of existing social housing stock and to complementary housing activities. These funds will flow through Canada Mortgage and Housing Corporation (CMHC) and Indian and Northern Affairs Canada.

This will assist the transition to market-based housing on reserve and address immediate housing needs while serving as an economic stimulus for many First Nations and rural areas by generating employment, the development of skilled trades and the creation of small businesses.

Northern Housing

In recognition of the distinctive needs of the territories, Budget 2009 will provide $200 million over two years in dedicated funding to support the renovation and construction of social housing units. The Yukon and Northwest Territories will receive $50 million each while the remaining $100 million will be allocated to Nunavut, where the need for new social housing is greatest. Funding will be provided to the territories through the Canada Mortgage and Housing Corporation.

Helping Municipalities Build Stronger Communities

Canadian homes need to be supported by a broad range of infrastructure to develop and maintain strong and prosperous communities. The Government understands, however, that much of the responsibility for maintaining the infrastructure of Canadian communities rests with Canadian municipalities.

In recognition of this important responsibility and to address the challenges municipal governments are facing in garnering capital funding for planned "ready to go" projects during an economic slowdown, Budget 2009 will make available up to $2 billion over two years in direct, low-cost loans to municipalities through the Canada Mortgage and Housing Corporation. These low-cost loans will significantly decrease the cost of borrowing for municipalities, and can be used by them to fund their contribution for cost-shared federal infrastructure programming.

This new source of funds will allow municipalities to invest in municipal housing-related infrastructure projects such as sewers, water lines, and neighbourhood regeneration projects, thus contributing to healthier, safer and modern communities for Canadians and their families.

In addition to low-cost loans to municipalities, Budget 2009 also announces a number of major new initiatives that will further accelerate and increase provincial, territorial and municipal infrastructure projects.

Table 3.6
Action to Stimulate Housing Construction

	2008–09	2009–10	2010–11	Total
	(millions of dollars)
Support for Home Ownership  and the Housing Sector
Home Renovation Tax Credit	500	2,500		3,000
Enhancing the Energy Efficiency of Our Homes		150	150	300
Increasing withdrawal limits under  the Home Buyers’ Plan		15	15	30
First-time Home Buyers’ Tax Credit	30	175	180	385
	530	2,840	345	3,715
Investments in Housing for Canadians
Renovation and Retrofit of Social Housing		500	500	1,000
Housing for Low-Income Seniors		200	200	400
Housing for Persons with Disabilities		25	50	75
First Nations Housing		200	200	400
Northern Housing		100	100	200
		1,025	1,050	2,075
Total—Action to Stimulate Housing	530	3,865	1,395	5,790
Loans to municipalities		1,000	1,000	2,000
Timing of Home Renovation Tax Credit	-500	500		0
Cash Basis	30	5,365	2,395	7,790
Provincial contributions		725	750	1,475
Total Stimulus Value		6,090	3,145	9,235
Notes: Figures in this table are presented on an accrual basis, and therefore, in some cases, will not match the figures contained in the budget text when those are presented on a cash basis. Totals made not add due to rounding.

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