Real Estate

2023 Economic Statement: An Overview of Affordable Housing and Mortgage Relief Initiatives in Canada

2023 Economic Statement: An Overview of Affordable Housing and Mortgage Relief Initiatives in Canada
Written by
  • Ashley Howard
| 11 December 2023
Reviewed, 3 January 2024

Table of contents

    The federal government’s Fall Economic Statement has put a spotlight on affordable housing and mortgage relief. It is a crucial step towards easing the challenges Canadians face in the housing market. 

    This post will look at the housing initiatives announced and what homeowners and homebuyers can expect from these initiatives in the future.

    Key Takeaways

    • A $20.8 billion investment was announced to boost housing through various initiatives.
    • The government announced funding and initiatives to build affordable homes and address the affordability crisis and housing shortage. 
    • The government also included updated expectations for banks to help borrowers impacted by high interest rates.

    What Were the Highlights of the Fall Economic Statement? 

    The 2023 Fall Economic Statement highlighted the allocation of $20.8 billion in net new policy actions over 6 years for initiatives that will support housing affordability. 

    As part of the Housing Action Plan, the federal government has announced:  

    • $15 billion to build more rental apartments.
    • $1 billion over 3 years to build affordable housing for vulnerable people.
    • $309.3 million in additional funding for the Co-operative Housing Development Program.
    • An agreement to build over 21,000 more homes in growing cities.
    • $50 million over 3 years to enforce restrictions on short-term rentals. 
    • Deny deductions for owners of short-term rentals, where short-term rentals are prohibited.
    • A Mortgage Charter builds on guidelines and expectations to provide mortgage relief to those at risk of default.

    Government On Affordable Housing Initiatives

    Canadians are currently experiencing a housing shortage and an affordability crisis. Homeownership remains out of reach for many, and rent is becoming increasingly unaffordable. 

    The federal government announced further investments in new construction projects nationwide in response to this ongoing crisis. CMHC estimates that Canada needs approximately 3.5 million additional housing units by 2030 to restore affordability. 

    Affordable Housing Fund

    An additional $1 billion is planned to be invested in the Affordable Housing Fund over 3 years to build affordable housing for Canada’s most vulnerable. Over 7,000 affordable housing units are expected to be constructed to support non-profit, co-op and public housing providers to ease the housing deficit. 

    Apartment Construction Loan Program

    Starting in 2025-26, $15 billion in new funding has been allocated to the Apartment Construction Loan Program to quickly build more than 30,000 rental apartments. This program boosts the construction of rental housing, providing low-cost financing to builders and developers to support construction and increase the housing supply in areas of high demand. By 2031-32, adding 30,000 homes will bring the program’s total to over 101,000. 

    Municipal Agreements

    As part of the housing accelerator fund, the federal government is working with cities nationwide to speed up the approval process. The government aims to rapidly increase the housing supply by eliminating hurdles and red tape to increase the housing supply. An agreement has already been signed with 9 cities and Quebec. 

    The agreements to date include: 

    • 2,000 homes in London, Ontario
    • 1,700 homes in Vaughan, Ontario
    • 2,600 homes in Hamilton, Ontario
    • 2,600 homes in Halifax, Nova Scotia
    • 3,150 homes in Brampton, Ontario
    • 950 homes in Kelowna, British Columbia
    • 1,200 homes in Kitchener, Ontario
    • 6,800 homes in Calgary, Alberta
    • 490 homes in Moncton, New Brunswick

    Additionally, the agreement on Nov 9th with Quebec will deliver $900 million in federal funding with a matching investment from the province. This combined $1.8 billion in new funding will create 8,000 social and affordable housing units in Quebec, with 500 allocated for those who are homeless or at risk of homelessness. 

    Measures to Address Canadian Mortgage Renewal Shock

    Many Canadians will face higher interest rates at renewal due to the recent rapid increase in interest rates. Many homeowners up for renewal over the next few years are worried they will face payment shock. The Fall Economic Statement addresses these concerns about increases in mortgage payments with measures announced to provide mortgage relief for vulnerable borrowers. 

    Canadian Mortgage Charter

    The Canadian Mortgage Charter is a set of guidelines and expectations designed to help borrowers stressed by higher interest rates. The Mortgage Charter outlines clear expectations for financial institutions and strengthens protections for borrowers. 

    The Canadian Mortgage Charter is an addition to already established guidelines and expectations. Many of these measures already exist under the Financial Consumer Agency of Canada (FCAC) Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances, which outlines the expectations of Federally Regulated Financial Institutions (FRFIs). Another measure of eliminating insured mortgage stress testing requirements was previously mentioned in OSFI’s response to Guidelines B-20.

    Guidelines and Relief Measures

    Several relief measures as part of the Canadian Mortgage Charter will:

    • Allow temporary amortization extensions to those at risk of mortgage default;
    • Waive fees and costs charged for relief measures;
    • Insured mortgage holders will no longer need to be  stress-tested when switching lenders at renewal;
    •  Give vulnerable homeowners the ability to make lump sum payments to avoid negative amortization or sell their principal residence without prepayment penalties;
    • Not charge interest on interest if mortgage relief measures result in a temporary period of negative amortization; 
    • And require homeowners to be contacted 4-6 months before their mortgage renewal to inform them of their options. 

    Initial Reactions and Industry Advocacy

    Reactions to these measures have been mixed. While some applaud the government for recognizing that many Canadians are struggling, others in the industry are still unsure if the measures announced will help or prolong existing issues with the housing market. 

    Industry Responses

    Chartered Professional Accountants of Canada (CPA) responded to the announced Canadian Mortgage Charter that they were happy the federal government is setting guidelines to help those impacted by higher interest rates. 

    TD Cowen analysts believe there will be implementation issues despite the charter’s meaningful changes. Additionally, they note that the relief could have material impacts on bank earnings and growth, though it’s too early to tell what impact it may have.

    Mortgage Professionals Canada’s Perspective & Recommendations

    Mortgage Professionals Canada (MPC) called for additional measures to help alleviate the burden on borrowers. These measures include the elimination of the stress test on all mortgage renewals, switches, and transfers so borrowers have more choices when up for renewal. Less than a third of mortgages are insured, meaning a majority of borrowers will be stress-tested at renewal if they want to switch to a new lender for lower rates.  

    MPC would like to see a return to 30-year amortization periods for insured mortgages, an increase to the insured mortgage cut-off to $1.25 million and having it indexed to inflation, grant digital income verification tools to the mortgage industry to crack down on fraud and establish a permanent housing roundtable that brings together all orders of government and not-for-profit sectors. 

    Frequently Asked Questions

    What is the Housing Accelerator Fund?

    The Housing Accelerator Fund aims to fast-track the creation of at least 100,000 new homes. The fund was created to help cut red tape and break down local zoning barriers to help rapidly increase the housing supply across Canada.

    How will the Canadian Mortgage Charter aid borrowers?

    The Mortgage charter builds on already existing guidelines and expectations for how financial institutions and lenders should work with borrowers. Clear reiteration of policy for insured mortgage holders to switch at renewal with requalifying through another stress test should allow more to access lower rates available at non-bank lenders.  

    Who is considered a vulnerable borrower in Canada?

    FCAC uses the term consumer at risk when referring to vulnerable borrowers at risk of mortgage default.

    Final Thoughts 

    The measures announced in the Fall Economic Statement are a step toward addressing the housing shortage and affordability crisis while providing much-needed mortgage relief. It remains to be seen if these initiatives will help solve or significantly impact Canada’s housing shortage and affordability crisis. 

    Reach out to our mortgage experts to see how you can keep your housing more affordable with our low mortgage rates.