On Monday, the Government of Canada announced a series of amendments to the foreign buyer ban — officially called the Prohibition on the Purchase of Residential Property by Non-Canadians Act — to expand the exceptions to the regulations, some of which have become an unintended thorn in the sides of developers across the country.
The four amendments to the foreign buyer ban are effective immediately, as of March 27, 2023, and are as follows.
While the foreign buyer ban was originally created with individual Canadians and the resale market in mind, a less-discussed aspect of the ban was its effect on the development industry, particularly with the legislation deeming an entity as foreign if non-Canadians owned 3% or more of it.
In the short months since the ban came into effect on January 1, this 3% has been repeatedly cited by developers as overly-restrictive, specifically for real estate investment trusts (REITs). With the amendment, the maximum amount of non-Canadian control in a REIT subject to the foreign buyer ban is now 10%.
Perhaps even more of a relief is the new exception that allows non-Canadians to purchase residential property, if the purpose is development. Previously, this exception was only applicable to publicly-traded corporations.
According to a CMHC FAQ, “development” does not include “the mere purpose of leasing or renting the property out to tenants or otherwise managing it as a rental property as part of its portfolio.” Repairs, renovations, and remodeling also do not count as “development,” but the CMHC notes that some expansions or remodels that are “tantamount to the construction of a new building or a change of use” — such as one that would create a new residential property — do, and will now be allowed.
Under the previous regulations, vacant land zoned for residential use or mixed-use with residential could not be purchased by non-Canadians.
The Government of Canada is now repealing that restriction — Section 3(2) — and with the change, non-Canadians can now purchase vacant land zoned for residential use and use it for any purpose.
A common criticism of the foreign buyer ban has been that it seemingly contradicts the federal government’s lofty immigration goals, or even gives the appearance of xenophobia, by limiting the ability of those who may be looking to settle down in Canada from buying homes.
Now, those who hold a work permit or are authorized to work in Canada are allowed to purchase residential property, so long as they have 183 days of validity, or more, remaining on their permit, and have not purchased more than one residential property.
“To provide greater flexibility to newcomers and businesses seeking to contribute to Canada, the Government of Canada is making important amendments to the Act’s Regulations,” said Hussen. “These amendments will allow newcomers to put down roots in Canada through home ownership and businesses to create jobs and build homes by adding to the housing supply in Canadian cities. These amendments strike the right balance in ensuring that housing is used to house those living in Canada, rather than a speculative investment by foreign investors.“
Post Credit: Storeys By Howard Chai
(https://storeys.com/canada-foreign-buyer-ban-amendments/)
