The Canadian federal government recently announced the 2023 federal budget of almost $491 billion. The budget plans on investing a lot of money in clean energy, support for low-income households, public health care, and dental care. But what was noticeably missing was a clear-cut plan on how to address the ongoing housing affordability crisis, particularly in terms of housing supply and handling urgent issues.
The federal deficit is anticipated to hit $40.1 billion in 2023-2024 with the new Liberal government spending and a lagging economy. That’s almost $10 billion more than last fall’s forecast.
These are big numbers. In fact, they’re the highest on record. But is government spending, both on a provincial and federal level, going to improve the lives of regular Canadians? With little focus on the housing crisis, many Canadians may continue to be shut out of the real estate market, both from a buying and renting perspective.
In 2022, the Canadian government established a temporary dental benefit. This was for children under 12 years old from families with no insurance and household incomes under $90,000. This benefit will fizzle out by June 2024 and be replaced by the new government-backed dental insurance program.
As part of Budget 2023, the projected cost of the new federal dental program will be more than double what was originally anticipated. Over the next 5 years, the Liberals will add another $7.3 billion to the plan. By the fiscal year 2023-2024, 13 billion will be invested in the program.
The new plan will be open to children up to the age of 18, the elderly, and people with disabilities who are uninsured and meet the income requirements.
Other items that will be addressed with federal budget spending include the following:
- Suicide prevention hotline. The feds plan to dedicate $158.4 million over 3 years to implement a free suicide prevention hotline. Canadians in need of mental health assistance and suicide prevention will be able to access the 3-digit number — 988 — 24 hours a day, 7 days a week. Telephone service providers will have until November 30, 2023, to put the number in place.
- Opioid crisis programs. With the continued opioid crisis plaguing Canadians from coast to coast, the government plans to set aside $359 million over 5 years for programs to address this problem.
Grocery bills continue to be a major problem for Canadians across the country. According to Statistics Canada, food purchase prices increased 10.6% year-over-year in February 2023. That’s the 7th consecutive month of double-digit increases.
Food prices in Canada will continue to rise throughout the year and into 2024, with the cost of groceries forecast to increase up to 7% in 2023 alone, according to a recent Canada’s Food Price Report. For a family of 4, the total food bill for the full year is expected to hit $16,288. That’s over $1,065 more than it was in 2022.
To address this issue, part of the federal budget for 2023 includes a Grocery Rebate. It will provide $2.5 billion in targeted inflation relief to Canadians in need. The new rebate will be distributed through a one-time payment from the Canada Revenue Agency (CRA) shortly after the legislation passes.
Targeting Predatory Lending
To address predatory lending practices in Canada, the government intends to do the following:
Lower the criminal rate of interest. The government proposes to make changes to the Criminal Code to reduce the criminal rate of interest. It plans to lower it from the current 47% annual percentage rate (APR) to 35% APR. Further consultations will also take place to discuss whether the criminal rate of interest should be decreased even further.
Lower payday loan rates. The federal government also plans to modify the Criminal Code’s payday lending exemption, which would prevent payday lenders from charging more than $14 for every $100 borrowed.
Lower Credit Card Transaction Fees For Businesses
Credit card processing fees are a significant expense for businesses. This can range anywhere from 1% to 4% when a customer uses their credit card at the point of sale.
The Liberal government plans to help businesses stuck with these high credit card processing fees by reducing them by up to 27% from the current average rate. This reduction is expected to save credit card-accepting businesses roughly $1 billion over 5 years.
Tackle The Rapid Rise In Home Prices
Over the past few months, the federal government has taken steps to help make housing more affordable. And the new budget will continue in this endeavour by doing the following:
Reduce Foreign Investor Activity
As of January 1, 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act is in effect. It prevents non-residents of Canada from buying residential property for 2 years. This is expected to help hedge against speculation and the use of Canadian property as financial assets for foreign investors. The government will also charge a 1% annual underused housing tax on the value of underused or vacant residential property in Canada owned by non-residents.
Reduce Inflated Home Prices Caused By Flipping
Many real estate investors flip homes for a quick profit. But flipping homes may have a detrimental effect on housing prices. As the price of flipped properties increases, other home sellers increase their prices in response. This leads to low-income areas with affordable housing becoming much more expensive. The government plans to address this issue in the budget. They plan on ensuring that profits from flipping homes held for under 12 months are fully and fairly taxed.
Make Buying A First Home More Affordable
The government will introduce a new Tax-Free First Home Savings Account. It will allow prospective homebuyers to save up to $40,000 to be put towards a first home purchase. These savings are tax-free. The government will also double the First-Time Home Buyers’ Tax Credit. This will provide homebuyers with up to $1,500 to put toward closing costs.
Critics argue that the incentives introduced are not enough to take a hard stance on the housing affordability crisis. With a constant influx of newcomers to the country, a spike in homelessness caused by inflation, and a significant lack of affordable housing, the federal budget may not be taking enough action to deal with the country’s housing crisis.
For many Canadians who are unable to afford their rent or mortgage this month, a more urgent solution is needed.
Green Technology Incentives
Perhaps the focal point of the federal government’s new budget is keeping Canada ‘green’. More specifically, the budget will set aside funds to stimulate economic growth in the country’s clean energy sectors through green tax credits and financing programs. There are also initiatives planned to expand various green-focused investments.
In total, the Liberals plan to spend $80 billion over the next decade on green economy-centred initiatives. This includes investments in clean-tech industries to spur the private sector in clean electricity, critical minerals, hydrogen production, and the electric-vehicle supply chain. Nearly one-third of the investment tax credits will be dedicated to clean power. This includes power lines connecting Canada from coast to coast.
Overall, the funds will be dedicated to both building a clean economy in Canada and assisting other countries in their own green initiatives.
Support For The Canadian Air Transport Security Authority
Several new air traveller-centred measures are also planned. The government intends to strengthen airline compensation responsibilities and provide the Canadian Air Transport Security Authority (CATSA) $1.8B over a 5-year period to speed up processing times and ensure more robust security efforts.
However, travellers will likely be the ones flipping the bill for this expense, not the government. The funds will come from an increase to the Air Travellers Security Charge. The charge for roundtrip domestic flights will increase from $14.96 to $19.87, while international flights will go from $25.91 to $34.42.
Tackling Junk Fees
The federal government is using Budget 2023 to put an end to junk fees, which come in several forms, such as:
- Roaming charges on cell phones
- Concert and event fees
- Excessive weight baggage fees
- Unwarranted shipping fees
The goal is to ensure that businesses maintain a level of transparency with their prices.
The federal government’s current budget is enormous, with billions of dollars on the table. Much of that spending is dedicated to creating a greener economy, as well as improving public health measures and reducing the cost of living, particularly for lower-income Canadians. But the housing affordability crisis may not be comprehensively addressed with the 2023 budget. Especially in terms of increasing supply, which would help alleviate spikes in home and rent prices. With nearly $491 billion being spent, many Canadians would hope that a big chunk would go towards more aggressive and urgent solutions for the housing predicament.