Canada Introduces Amendments to Foreign Buyer Ban
The Canadian government decided to introduce four amendments to the foreign buyer ban today, less than three months after it was first introduced. One of the amendments raises the foreign control threshold from 3 to 10 percent.
The government of Canada announced on Monday that it would be expanding the exceptions to the laws governing the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which forbids the sale of residential property to foreigners. Some of these exceptions have unintentionally irritated Canadian developers.
The following four modifications to the foreign buyer ban will take effect as of March 27, 2023, and are immediately applicable. While the foreign buyer ban was initially designed with individual Canadians and the resale market in mind, a less-discussed aspect of the ban was its impact on the development industry, especially with the legislation deeming an entity as foreign if non-Canadians owned 3 percent or more of it. The foreign control threshold is now 10 percent.
This 3 percent has been repeatedly criticized as being excessively restrictive, particularly for real estate investment trusts (REITs), in the few months since the ban went into effect on January 1.
The accompanying Regulations to the Prohibition on the Purchase of Residential Property by Non-Canadians Act have been amended.
The accompanying Regulations to the Prohibition on the Purchase of Residential Property by Non-Canadians Act will be changed, according to the announcement made today by the honorable Ahmed Hussen, Minister of Housing and Diversity and Inclusion.
As part of the Canadian government’s plan to increase housing affordability for its citizens, the Act was approved by Parliament on June 23, 2022, and it and its accompanying regulations went into effect on January 1, 2023. The Act’s accompanying regulations were created to outline the precise exceptions, definitions, and clarifications required to carry out the prohibition.
The Government of Canada is amending the Regulations to expand exceptions that permit Non-Canadians to buy a residential property in certain circumstances, enhancing the flexibility of newcomers and businesses looking to increase Canada’s housing supply. By encouraging home ownership in their communities earlier, these amendments will support people and families who are trying to establish a life in Canada and deal with the housing shortage. On March 27, 2023, these changes will become effective.
The Minister of Housing and Diversity and Inclusion has announced the changes below.
Increase the Number of People with Work Permits who can buy a house to live in while working in Canada.
Those who possess a work permit or are qualified to work in Canada in accordance with the Immigration and Refugee Protection Regulations will be able to purchase residential property as a result of the amendments. If a work permit holder has 183 days or more left on their work permit or work authorization at the time of purchase and they haven’t bought more than one residential property, they are eligible. The existing rules regarding tax filing and prior employment history in Canada are being repealed.
Repealing the current clause to exempt vacant land from the restriction.
Section 3(2) of the regulations is being repealed, so all lands zoned for residential and mixed use are exempt from the prohibition. Now, non-Canadians may buy vacant land that is zoned for both residential and mixed use, and they may use it for anything they like, including building homes.
Exception for the sake of development.
Non-Canadians are permitted to purchase residential property under this exception in order to develop it. Additionally, the changes expand the Act’s exception for publicly traded corporations to include publicly traded entities created under Canadian or provincial law and controlled by a non-Canadian.
Increasing the corporate foreign ownership threshold from 3 to 10 percent.
For the purposes of the prohibition, the control threshold has increased from 3 percent to 10 percent with respect to privately held corporations or privately held entities formed under the laws of Canada or a province and controlled by a non-Canadian. In line with the Underused Housing Tax Act, this is what is meant by “specified Canadian Corporation.”.
“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. 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.”
— The Hon. Ahmed Hussen, Minister of Housing and Diversity and Inclusion