First-Time Home Buyer Program Failed Due to Poor Design: CMHC Audit

A for sale sign in front of a house in Oakville, Ont., west of Toronto, on Feb. 5, 2023. (Richard Buchan/The Canadian Press)

A federal program aimed making first-time home ownership more affordable has failed after the program attracted less than a fifth of the buyers it was aiming for, according to an internal auditors report from the Canada Mortgage and Housing Corporation (CMHC).

The $1.25 billion First-Time Home Buyer Incentive program offered government funding for shared-equity mortgage loans of up to 10 per cent of the purchase price, which would go toward a larger down payment. The program served just 18,291 home buyers of its 100,000 goal, says the auditor report which was first covered by Blacklock’s Reporter.

The report said the program had “low uptake” and was poorly designed and ineffective.

“Buying is increasingly unaffordable in Canada with record rising inflation, interest rates and increased property values during the pandemic contributing to the trend,” the report said. “As a result, it has become more difficult to qualify for a mortgage.”

The report comes just weeks after CMHC announced that the First-Time Home Buyer Incentive had been discontinued and that it would not be taking new applications for the program after March 21, 2024.

The program was meant to help first-time buyers by lessening the amount they would need for a down payment on a new home, but was limited to households with a combined annual income of $120,000, or $150,000 for homes purchased in Toronto, Vancouver and Victoria. It was applicable to homes that were no more than four times the household income of buyers.

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While the program also promised large savings for buyers, claiming that the incentive would reduce mortgage sizes and costs, the actual amount saved by the average buyer who participated in the program was just $70 a month, according to the CMHC report.

The cancellation of the program, which was first introduced by the Liberal government in 2019, comes amid a housing crisis in Canada as home prices have soared alongside interest rates.

CMHC has called for “bold action” to address the crisis, including recommending the government do more to incentivize home building and called for concerted action from both the public and private sectors to address the issue.

The Crown corporation has previously stated that Canada needs at least 3.5 million new homes by 2030, but CIBC has claimed the number should be closer to 5 million as the bank noted CMHC’s predictions were based on a population of 38.9 million, well below the current 41 million people in Canada, according to Statistics Canada estimates.

Leading up to the new federal budget, Prime Minister Trudeau and other members of his cabinet, such as Deputy Prime Minister and Finance Minister Chystia Freeland, have made housing a core issue.

Minister Freeland highlighted the issue last month in a meeting with British Columbia Premier David Eby, stating that housing would be a major part of the federal budget.