In January 2023, Canada passed legislation entitled the Prohibition on the Purchase of Residential property by Non-Canadians Act with the design to repeal after a two-year period. While this action is intended to help prevent rising housing prices due to non-Canadians buying homes as a speculative financial asset class1, it stands to have significant repercussions for global mobility programs. This article dives deeper into how the ban will influence talent strategy, housing program benefits, and other facets of international relocation.
How did we get here?
Following the pandemic, remote work demands on housing and labor disruption challenges saw the Canadian real estate market experience sharp declines in both home sales and rentals. While the 24-month ban on foreign nationals owning Canadian real estate appears to be a blunt piece of legislation, it is somewhat emblematic of a number of legislative measures (circa 2016 to 2022) that have been passed to address foreign nationals or corporations purchasing property across the nation.
The BC Additional Property Tax, Vancouver Empty Homes Tax, Toronto Vacant Home Tax, Underused Housing Tax and the Non-Resident Speculation Tax are examples of previous legislation which, in whole or in part, aimed to reduce acquisition / demand and improve affordability / supply of housing for Canadian residents. Though certain groups contend that this new ban unfairly targets foreign buyers and could possibly harm the economy, it is equally defended as a necessary measure to confront the challenge of housing affordability nationwide.
While the fairness of this legislation remains outside of the scope of this article, Vialto’s recommendation is that organizations urgently take a current pulse of their mobile population segments and any associated costs when considering relocation / assignment budgets.
What does this mean for foreign buyers?
The new rules will have a significant impact on global mobility programs. For one, foreign buyers will no longer be able to purchase residential property in Canada. This includes investment properties, vacation homes, and other types of residential real estate. Additionally, foreign buyers who already own property in Canada may experience a lower return on their capital investment, if during their ownership, they are subject to one or more of the federal and provincial charges targeting vacant or underused property.
These changes are likely to discourage foreign investment in Canadian real estate, which could have a ripple effect on the housing market and economy. For companies with global mobility programs, it may become more difficult to attract and retain international talent if the legislation leads to Canada no longer being seen as a desirable place for foreign nationals to live and work.
How will this affect global mobility programs?
Many global mobility programs provide the benefit in which employees can purchase property in the host country as part of their relocation package. However, the Canadian government’s recent ban stands to have a significant and costly impact on these programs.
Employees who are relocating to Canada, and those who are already in Canada and do not meet the criteria for purchase, will no longer be eligible to use their company’s relocation package to purchase property. This could deter some employees from relocating, as they may not want to live in a leased or rental accommodation.
The ban could also affect global mobility programs that assist with purchasing property. These program managers will now need to assess alternative ways to help employees with their housing needs.
Talent streams impacted by this ban
Under the current design, the legislation and the exceptions in place will have an adverse impact on three key categories of talent in Canada: temporary foreign workers, international students, and permanent hires.
Canadian work permit (WP) holders will need to meet a three-year residency requirement (as of January 1, 2023) before they would be eligible to purchase real estate. In summary, the criteria is as follows:
In other words, a work permit holder who is on a three-year assignment that commenced in 2022, or will commence in 2023, would have to prove that Canadian income taxes were filed in any province for 2019 to 2021, which is unlikely. Consequently, the traditional transition from temporary housing to permanent housing is no longer a viable option.
For international students and post-graduation work permit holders, the criteria is as follows:
For context, the national average house price in December 2022 was C$626,000. In the country’s capital city, Ottawa, it was C$611,000. Calgary and Montreal reflected averages of C$506,000 and C$499,000 respectively. Greater Vancouver and Greater Toronto, meanwhile, had average prices exceeding C$1 million2. The annual median salary in Canada as recently as 2022 was $26,800 per year for post graduate students3.
The competitiveness of intern and recent graduate mobility programs will need to be benchmarked to determine their ability to attract and retain this segment of future talent in Canada.
What can global mobility teams do now?
The impact of this legislation on global mobility programs is already starting to be seen. It will likely have far-reaching implications for employers seeking to attract key talent from abroad through long-term assignments, as well as permanent international new hires or transfers into Canada.
To quantify the impact on talent strategies and the financial implications on program benefits (e.g., extended housing, duplicate housing, home sale / purchase / marketing, broker market analysis, and guaranteed buy-outs, etc.) it’s essential that global mobility program teams perform a current state assessment and workforce forecast. Specifically, Vialto encourages teams to consider the following factors:
In its current form, the Act is set to be automatically repealed in 2025, but this timeline may change. How the ban will impact global mobility program costs, its effect on real estate and service provider service delivery models, and whether it can be implemented practically are also unknown. Program managers must stay updated on developments so that they can effectively manage duty of care during relocation periods, and enable workers to settle in Canada without compromising employee satisfaction and business continuity.
Contact us
Please reach out to your usual Vialto Partners contact should you have any questions on the new legislation and its impact on your global mobility program. Alternatively, you may contact the following members of the Vialto Partners team:
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1 Budget 2022: Address by the Honorable Chrystia Freeland Deputy Prime Minister and Minister of Finance – Canada.ca (April 7, 2022)
2 National Price Map – The Canadian Real Estate Association
3 Economic & Social Report: International Students as a source of labor supply
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