Global Crisis

Government Support of Homeownership in

Posted on Tuesday, November 2, 2010

Critics have said that governments in countries with homeownership rates similar to those of
the U.S. don't subsidize homeownership, so why should the U.S.? In many cases, that’s just not
true. Here are some examples of how other governments support to encourage
homeownership.
Canada
Homeownership rate: 68.4%
Canadian homeowners can deduct the interest on a mortgage on a home used as a
rental property (there are exclusions for passive activity on the home).
There is an indirect way that Canadian homeowners can get an MID:
o Called an “asset swap”
o Owner sells his/her investments, purchases a home in full or in part by the sale,
obtains a mortgage on the home, then buys back their investments with money
from the mortgage
o 2001 Supreme Court of Canada case decided this – Singleton vs. Canada
o Through an asset swap the interest on a mortgage is deductible
Canadians have about 70% equity in their homes on average (i.e. 30% mortgage debt),
compared to 45% average equity by U.S. homeowners.
Mortgage rates in Canada are fixed for a statutory maximum of 5 years – after that they
expire and the rate is renegotiated.
In Canada there is no tax advantage to converting home equity into debt (in the U.S.
there is).
Canada offers a first-time homebuyer tax credit ($5,000) on all homes that are closed on
or after January 27, 2009.
Home Buyers’ Plan – government sponsored program that allows Canadians to
withdraw funds from their Registered Retirement Savings Plan to buy or build a
qualifying home for themselves or for a related person with a disability.
Canada Mortgage and Housing Corporation
o Canada’s national housing agency
o Established as a government-owned corporation in 1946
o Provides mortgage loan insurance, mortgage-backed securities, housing policy
and programs
o Provides funding and consultation for affordable housing NAR


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