The federal Liberals are having second thoughts about a 2015 campaign promise out of concern that expanding the popular Home Buyers' Plan would throw fuel on overheated housing markets.
An internal document suggests high housing prices are a key reason the Liberals don't appear to be in a hurry to fulfill an election pledge that would enable Canadians to dip back into their registered retirement savings to help pay for a home.
The detail surfaces as policy-makers consider new measures aimed at cooling real estate markets and to slow rising household debt loads, which have climbed to historic levels.
During the election campaign, the Liberals promised to expand the Home Buyers' Plan to allow those affected by major life events — death of a spouse, divorce or taking in an elderly relative — to borrow a down payment from their RRSPs without incurring a penalty.
The current plan enables first-time buyers to borrow up to $25,000 tax-free from their RRSPs to put towards the purchase of a home. The amount must be repaid within 15 years.
The Trudeau government recently signalled that its promise to modernize the plan was still in progress, but that it faced "challenges."
The update was posted on a website the government created to track the tasks Prime Minister Justin Trudeau assigned to his cabinet ministers.
An accompanying explanation on the site says Ottawa has instead provided more support for families facing significant life changes, helped stabilize the real estate market by tightening mortgage rules and committed $11.2 billion over the next 11 years to support affordable housing.
A June briefing note for Finance Minister Bill Morneau adds more details about the government's thinking on the Home Buyers' Plan.
The document, prepared for Morneau ahead of his meeting with the Canadian Real Estate Association, recommends he answer questions about the status of expanding the plan by saying policies that increase home ownership by triggering more demand would help push prices higher.
The briefing, obtained via the Access of Information Act, also lays out the government's concerns that low interest rates and rising home prices have encouraged many Canadians to amass high levels of debt just so they can enter the real estate market.
"Policies to further boost home ownership by stimulating demand would exert more pressure on house prices," says the memo, which also notes that CREA has recommended the government extend the plan to allow more borrowers more time to repay their withdrawals from their RRSPs.
"With respect to housing affordability, at this time, the government is prioritizing investments to support Canadian households that need it most."
The briefing note also says: "High levels of indebtedness warrant proactive and prudent management of evolving housing-related vulnerabilities and risks."
The document also recommends Morneau reiterate Ottawa's commitment to release a comprehensive national housing strategy in 2017.
The Liberal government unveiled its housing plan late last month, but home ownership only gets a passing mention in the strategy. The plan commits to spending billions to build up Canada's stock of affordable rental housing — a strategy Social Development Minister Jean-Yves Duclos expects to put downward pressure on housing prices.
Organizations like the CREA, however, argue the government should be doing more to help more people make down payments.
The association, which represents more than 100,000 real estate brokers and agents, is now lobbying Ottawa to create intergenerational RRSP loans that would give parents the option of helping their kids buy a home by allowing them to tap into their retirement savings. The group also wants the maximum withdrawal limit increased by $10,000.
— with files from Jordan Press