In a recent news article, the NDP government of BC has announced that they will be cancelling the first-time home buyers program. For those that were previously unaware, the first-time home buyers program allows people purchasing their first property to borrow up to 5% of the property’s value, up to a maximum of $37,500. Theoretically, since the minimum down payment you need to buy a home is 5%, this loan program allowed people to buy a home when they only had 2.5% of the home’s total purchase price. You can find more information about the program here. Note that the deadline as clearly stated on the page says that the deadline is on March 31st!
Expert opinions regarding the program have been largely negative. In particular, although the program itself was suggested as a way to help BC residents own property, it was met with plenty of bad press and negative opinions. Some criticize the program as a way the Liberal party tried to garner voter support, as the timing of the program was a mere few months before the provincial elections.
Other critics said that on paper, it looks like it will help out buyers, which may be partially true, but the larger benefit will be going towards buyers, as the cheap debt makes people more willing to pay more for their homes. If there is an increase across the board in willingness the pay, then the obvious result will be an increase in housing prices. Some have suggested that that was the goal of the BC Liberals, to begin with, as they have an interest in keeping the housing prices high.
This is further reinforced by the fact that the program was introduced a little after the housing market started to cool down a bit. It appears that BC Liberals may have wanted to use this program as a sort of stimulus to get the housing economy going again. In the end, however, the program just works to increase debt levels, which in the long term, is unsustainable.
The solution, according to the NDP, is a new housing program named HousingHub. The goal of this new branch of BC Housing is to partner with non-profits, private developers, and other levels of government to “find and use or re-use available land to construct and/or redevelop outdated existing housing developments.” The funding will be redirected from the previously mentioned first-time homebuyer loan program, into HousingHub. Not only are there already construction projects underway from HousingHub which will help middle-income families, but it also seeks to “establish a new affordable owner-purchased housing program.”
Seeing as the previous first-time homebuyer’s loan program only had about 3000 applicants over a year when they were expecting around $12,000, it seems like this new program can only be an improvement. We shall wait and see.