The FTHBI program discontinues, leaving future homeowners seeking new paths to affordability
The Canada Mortgage and Housing Corporation (CMHC) has officially terminated the First-Time Home Buyer Incentive (FTHBI), according to BNN Bloomberg.
The cutoff for new or revised FTHBI applications is set for March 21 at midnight Eastern Time. Submissions beyond this deadline will be subjected to manual review, with the final date for manual review requests being March 25 at midnight Eastern Time.
Following these dates, CMHC has declared that “no new approvals will be granted” after March 31.
Daniel Vyner, principal broker at DV Capital, criticized the program for its limitations, specifically pointing out that “the program was restrictive, primarily around the maximum allowable income levels as well as maximum property values.”
This design flaw made the program less than ideal in regions where the average purchase price exceeded these thresholds.
The initiative's inability to meet its objectives is underscored by its usage of only $408.92m out of a budgeted $1.25bn, assisting merely 22,826 homebuyers against a target of 100,000.
Launched in September 2019, the FTHBI aimed to make home ownership more accessible by offering new homeowners an interest-free loan in exchange for a stake in the home's equity, thereby reducing monthly mortgage payments without increasing down payment costs.
Qualifying buyers were offered a loan ranging from five to ten percent, with the requirement to repay the FTHBI loan, plus the additional equity percentage, either upon selling the home or at the 25-year ownership mark, according to Penelope Graham, the director of content at Ratehub.ca.
However, the program “struggled to find its footing,” particularly in larger cities where property value caps seemed unrealistic.
Critiques of the program extend to its fundamental structure.
James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender, highlighted the program's significant flaws, stating that “allowing all consumers to amortize their mortgage over 30 years has always been a better way to help first-time home buyers.”
Laird also pointed out the oddity of “owning a home with the government,” emphasizing the government's benefit from property value appreciation without contributing to maintenance costs.
Furthermore, eligibility constraints—such as requiring buyers to have annual incomes of $120,000 or less, with the combined incentive and mortgage capped at four times the buyer's income—were seen as too limiting.
This cap was slightly raised to $150,000 for cities like Toronto, Vancouver, and Victoria in May 2021, but the program remained applicable only for insured mortgages with a purchase price of under $1m.
Considering these challenges, the CMHC has shifted focus towards the First Home Savings Account (FHSA), with over 500,000 Canadians currently using an FHSA account. This pivot is intended to allow the government to “focus on other impactful policy areas.”
Despite the program's discontinuation, voices like Clay Jarvis of NerdWallet Canada express hope that this failure does not deter the government from pursuing innovative measures to facilitate home ownership.
Jarvis advocates for continued efforts to assist first-time home buyers, recognizing the persistent challenge of housing affordability in Canada.
