On Monday, the Canadian government announced a set of changes to the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which is also known as the foreign buyer ban. These changes will expand the exceptions to the rules, some of which have become a pain for developers all over the country. As of March 27, 2023, the foreign buyer restriction will be changed in the four ways listed below.
The foreign buyer ban was originally meant for individual Canadians and the resale market. However, a less talked-about effect of the ban was how it affected the development industry, since a company was considered foreign if at least 3% of it was owned by a non-Canadian. In the few months since the ban went into effect on January 1, developers have criticized this 3% restriction as being overly restrictive, especially for real estate investment trusts (REITs). With this amendment, the maximum amount of non-Canadian control authorized in a REIT subject to the foreign buyer prohibition is now 10 percent.
The new rule that lets non-Canadians buy homes for development purposes could be an even bigger benefit. Previously, only publicly traded corporations were subject to this requirement. According to CMHC’s Frequently Asked Questions, “development” does not include “the primary purpose of leasing or renting the property to tenants or managing it as part of its portfolio of rental properties.” Neither do repairs, renovations, or remodeling count as “development.” Nevertheless, the CMHC states that some additions and renovations that are “equivalent to the construction of a new structure or a change of use—such as those that establish a new residential property—are approved and will continue to be so.
Under the previous legislation, non-Canadians were not permitted to purchase empty residential or residential-mixed properties. Non-Canadians may now buy residentially zoned, vacant property for any reason as a consequence of the Canadian government’s repeal of Section 3(2). Recurring criticism of the foreign buyer ban has been that it seems to contradict the federal government’s ambitious immigration goals or even creates the image of xenophobia by limiting the ability of those wishing to settle in Canada to acquire real estate.
Individuals who have a work permit or are authorized to work in Canada may now purchase residential property, provided they have at least 183 days remaining on their work permit and have not previously purchased more than one residential property.