On January 1, a two-year national ban on the sale of residential real estate to non-Canadians goes into effect. The ban is part of the federal government’s plan to address housing affordability and supply.
Here’s what you need to know about how it works:
Timeline
The “Prohibition on Non-Canadians Purchasing Residential Property Act” prohibits “non-Canadians” and corporations controlled by non-Canadians from purchasing residential property. A “non-Canadian” is someone who is not a Canadian citizen, permanent resident, or an Indian under the Indian Act. However, there are a number of exceptions.
“The ban is a two-year temporary measure that is part of the government’s response to Canadians’ urgent concerns about housing affordability,” a spokesperson for the Minister of Housing, Diversity, and Inclusion said in response to questions about the act. “It is also expected to help reduce the flow of foreign money into Canada for residential real estate purchases.”
Foreign home buyers are already subject to taxes in Ontario and British Columbia. It’s difficult to find statistics on foreign home ownership, but Statistics Canada estimated in 2017 that non-residents own 3.4 percent of all residential properties in Toronto and 4.8 percent in Vancouver. These figures were higher for condos: 7.2% in Toronto and 7.9% in Vancouver.
What happens if you break this law
A non-Canadian who buys a house in violation of the new law faces a $10,000 fine and the possibility that the house will be put up for sale. Renters are not covered.
What are the exceptions
International students are exempt from this ban if they meet a number of criteria, including purchasing a property for less than $500,000. Exempted are temporary foreign workers who have worked in Canada for at least three years and meet certain other criteria, as well as refugees and refugee claimants. Accredited members of foreign missions in Canada are also eligible.
The regulations do not apply if they conflict with Indigenous Peoples’ existing treaty rights.
The three-year restriction, according to Stephen Cryne, president and CEO of the Canadian Employee Relocation Council, is “contrary to the government’s overall objectives of attracting the brightest and best to our country.” According to the new rules, if someone moves to Canada for work, they cannot buy a home right away. Furthermore, if someone recently moved to Canada from another country and already owns a home, they will be unable to purchase a new one if they need to relocate to another city, he noted.
His organization is also concerned that relocation companies, which sometimes buyout employees’ homes if they need to relocate quickly, will be unable to purchase homes under this new regulation because the majority are not Canadian owned.
Furthermore, American or multinational corporations will be unable to purchase employees’ homes in order for them to relocate.
“It’s tying up many of those companies at a time when we need to be moving people across the country,” he explained.
According to Michael Bourque, CEO of The Canadian Real Estate Association (CREA), permanent residents do not have that status when they first arrive in Canada.
“Given that we’re in a global competition for talent,” from artificial intelligence experts to carpenters, saying you can come but can’t buy a home sends “a terrible message,” he says.
What is residential property?
Buildings with up to three units, as well as parts of buildings such as semi-detached homes and condos, are included. Larger buildings with multiple units are exempt from the law.
Where does it apply?
The law only applies to residential properties located in Census Metropolitan Areas or Census Agglomerations, or areas where the majority of Canadians live. If you are unsure, the federal government has provided a map that shows where the law applies and does not apply.
