Most people know REALTORS® as real estate professionals who assist them when they buy or sell a home. But did you know that REALTORS® are also advocates for home ownership and home owners?
Twice a year, representatives from our association go to Ottawa and Toronto to talk to our local MPs and MPPs about issues that concern not only the real estate industry but also property owners and buyers. In May of this year, REALTORS® from the Greater Hamilton-Burlington area went to Ottawa to speak to MPs about three issues.
Indexation of the Home Buyers’ Plan (HBP)
First time buyers may borrow their down payment from their own RRSPs under what is called the Home Buyers’ Plan (HBP).
The HBP was created in 1992 after REALTORS® lobbied the federal government for a temporary program to help first time buyers. In 1994, REALTORS® again lobbied successfully to make the HBP permanent. The Home Buyers’ Plan began with a limit of $20,000 borrowed from RRSPs; the amount was raised in 2009 when it was realized that $20,000 didn’t have the same impact as a down payment in 2009 as it did in 1992. First time buyers are now allowed to withdraw up to $25,000 from their own RRSPs, tax-free, so long as it is all repaid within 15 years. In 2011, more than 53,000 home were purchased using the HBP, resulting in over $2.6 billion in spin-off spending and more than 20,500 jobs.
REALTORS® are lobbying to have the amount borrowed under the HBP indexed to increase in $2,500 increments. Indexation will ensure the amount borrowed under the HBP will better keep pace with the rise in the cost of living.
Tax Deferral on Income Property Reinvestment
Many average Canadians are reluctant to sell their investment properties to reinvest in another income property because of the tax consequences. When an investment property is sold, sellers are taxed on their capital gains and recaptured capital cost allowance. This is a big enough tax hit that owners are often left with little equity to acquire another investment property of similar or greater value, or they simply choose not to sell.
REALTORS® are lobbying the federal government to defer the taxes paid on the sale of investment properties for one year, to allow the seller a chance to reinvest the proceeds from the sale of one investment into the purchase of another. This would help stimulate demand in the struggling commercial real estate market and assist Canadians who use rental income as their retirement income. Over half of individuals who would benefit from this policy change have incomes below $50,000.
The benefits of this type of program would go beyond the individuals taking advantage of the tax deferral. Investment in property triggers renovations, retrofits and redevelopment, which accelerates the economy, greens the environment and revitalizes communities. The average property investment generates over $287,000 in economic spin-off activity and more than one job is created for every two investments.
Using the Home Buyers’ Plan During Life Changes
Job relocation, the death of a spouse, a decision to accommodate an elderly family member or a marital breakdown often triggers a move, and Canadians are not always in a position to purchase another home to accommodate their new circumstances. REALTORS® are asking that the Home Buyers’ Plan be available to Canadians experiencing major life changes as a zero-interest self-loan to help them purchase a new home suitable to their new circumstances.
Home buyers and sellers can count on REALTORS® to look out for their interests in more than a real estate transaction.