Quebec’s parties are offering a whole set of measures for those dreaming of buying their first home: from increasing tax credits and tax refunds to help with a down payment. However, economists warn that some of these measures may not so much make housing more affordable as increase demand and, consequently, prices.
In brief
- CAQ proposes increasing the maximum tax credit for a first-time buyer from $1,400 to $7,000.
- PQ — to $3,000, and also promises to refund the QST (TVQ) when purchasing or self-building a new home — up to $45,000.
- PLQ proposes reducing the tax burden on new housing priced up to $500,000 — by a maximum of $10,000 for a house or condominium and up to $30,000 for a plex.
- Québec solidaire proposes down-payment loans of up to $50,000, as well as a tax credit of up to $1,200 for a pre-purchase inspection.
- PCQ has not included any special measures for first-time buyers in its plan.
What are the parties proposing?
For the CAQ, the main focus is on increasing the existing tax credit. It proposes raising the maximum amount fivefold — from $1,400 to $7,000. According to the party’s financial plan, this measure would cost the budget about $600 million over five years.
PQ proposes a smaller tax credit — up to $3,000. But the party adds a QST (TVQ) refund when a first-time buyer purchases or self-builds a new home. The potential refund could reach $45,000. The total cost of PQ’s planned tax-refund measures is estimated at $280 million over five years.
PLQ is betting specifically on new construction. The party proposes easing the tax burden on new houses and condominiums priced up to $500,000 — by a maximum of $10,000. For plexes, the amount could reach $30,000. The measure is not limited to first-time buyers. Its cost to the budget is estimated at about $475 million over five years.
Québec solidaire proposes a different mechanism — government loans for a down payment of up to $50,000. The home being purchased must cost less than the market’s median price. The money is repaid when the property is sold, along with an amount corresponding to the increase in its value. QS also proposes a tax credit of up to $1,200 for a pre-purchase inspection.
At the same time, the party proposes eliminating the refund to buyers of the real estate transfer duties — the so-called “welcome tax” (taxe de bienvenue). According to the financial calculations presented, the inspection credit would cost $184 million over five years, while eliminating the refund of the real estate transfer duties should bring the budget about $560 million.
Will these measures actually help people buy a home?
This is where the main economic question begins.
Antoine Genest-Grégoire, a professor in the taxation department at the Université de Sherbrooke, notes that tax credits paid directly to buyers have historically raised many questions among economists.
The logic is simple: if every potential buyer receives an extra $3,000 or $7,000, their ability to pay for housing increases. But if the amount of available housing hardly changes, the additional demand can lead to higher prices.
In that case, part of the government assistance may ultimately go not to buyers, but to property sellers.
Why is new construction a special case?
Tax refunds when buying a new home work somewhat differently.
To take advantage of such a subsidy, a new home has to be built. So government assistance can potentially stimulate not only demand but also supply.
That is what, according to Genest-Grégoire, makes such measures more interesting from a market perspective: even if part of the subsidy is reflected in the property price, an additional housing unit appears at the same time.
However, the supply effect does not appear instantly. Construction takes time, while the government has to bear the budgetary costs already now.
What about the down payment?
QS’s proposal is fundamentally different from a typical subsidy.
The government is not simply giving the buyer $50,000 that disappears from the budget. It is a loan that is repaid when the property is sold, taking into account the increase in its value.
A similar scheme already existed at the federal level: the Canada Mortgage and Housing Corporation (CMHC) had a program of a comparable type, but it was shut down after four years. The criteria of that program differed significantly from QS’s proposal, so a direct comparison between them is difficult.
Why has the topic become central in the election?
This number of proposals aimed at first-time buyers reflects a broader housing affordability problem.
ENAP professor Philippe Dubois links the parties’ current attention to this topic to the high cost of living and the fact that more and more people are postponing major life plans, including buying a home and starting a family.
Emmanuelle Chokette, a professor of communications and political strategy at the Université de Sherbrooke, also notes that a party that completely ignored the issue of housing affordability could look disconnected from one of voters’ most acute economic problems.
What should a buyer keep in mind?
The size of the promised assistance by itself does not show how much real housing affordability will change.
For a buyer, several factors matter at once:
- how quickly housing supply can increase;
- whether additional demand will lead to higher prices;
- whether the measure applies to new or existing housing;
- who exactly is eligible for assistance;
- whether the funds received will have to be repaid;
- what the long-term costs are for the budget.
Thus, a $7,000 tax credit does not necessarily mean $7,000 in real savings for the buyer, just as a tax refund on a new home cannot be considered separately from its final price.
What happens next?
The parties’ proposals show how difficult the task of a first-time buyer has become in Quebec’s market. Some measures are aimed directly at the buyer, others at new construction, and still others help solve the down-payment problem.
The main question now is not only the size of the promised assistance, but also how each measure will simultaneously affect demand, supply, real estate prices, and public finances.
That is why, when comparing election platforms, it is important to look not only at the amount promised to the buyer, but also at the mechanism for providing it and the possible consequences for the entire market.
