Government announces latest bid to tackle supply shortage
The federal government has announced details of changes to mortgage insurance rules in a bid to encourage construction of more secondary suites and addition of new units to existing homes.
Effective January 15, 2025, the government will allow mortgage insurance for Canadians who intend to construct additional units not for use as a short-term rental, as long as that borrower already owns their current property and either they or a close relative are occupying a current unit.
A communique released on Tuesday (October 8) said borrowers would be permitted to tap into insured refinancing to build up to a maximum of three additional units, which are required to be fully self-contained dwellings such as laneway homes or basement suites with separate entrances.
A maximum loan-to-value (LTV) of 90% of the property value will be permitted at a maximum amortization of 30 years, the government said, while the “as improved” value of the existing residential property cannot exceed $2 million.
Deputy prime minister and finance minister Chrystia Freeland also announced that the government was launching consultations on taxing vacant land in an effort to unlock more land for home construction and incentivize building homes.
In a statement, Freeland said Canada “must use every possible tool” to accelerate home construction and boost housing affordability. The new measures, she said, would “[make] it easier to add a secondary suite to your existing home and [make] full use of available land in our communities.”
The measures arrive as the latest efforts by the federal government to tackle a mounting housing crisis which has priced scores of Canadians out of purchasing a home thanks to affordability hurdles and a chronic lack of supply.
In recent weeks, it has announced other policies including a hike of the insured mortgage cap and extension of longer amortizations to first-time homebuyers and those buying newly-built properties, and removed the requirement for uninsured borrowers to pass a stress test when switching their mortgage to a new lender at renewal time.
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