Regulations Amending the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations: SOR/2023-66
Canada Gazette, Part II, Volume 157, Number 8
SOR/2023-66 March 27, 2023
PROHIBITION ON THE PURCHASE OF RESIDENTIAL PROPERTY BY NON-CANADIANS ACT
P.C. 2023-288 March 27, 2023
Her Excellency the Governor General in Council, on the recommendation of the Minister of Housing and Diversity and Inclusion after consultation with the Minister of Finance, makes the annexed Regulations Amending the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations under section 8 of the Prohibition on the Purchase of Residential Property by Non-Canadians Act footnote a.
Regulations Amending the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations
1 Paragraph (a) of the definition control in section 1 of the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations footnote 1 is replaced by the following:
- (a) direct or indirect ownership of shares or ownership interests of the corporation or entity representing 10% or more of the value of the equity in it, or carrying 10% or more of its voting rights; or
2 Paragraph 2(b) of the Regulations is replaced by the following:
- (b) an entity formed under the laws of Canada or a province – whose shares or ownership interests are not listed on a stock exchange in Canada for which a designation under Section 262 of the Income Tax Act is in effect – and controlled by an entity referred to in paragraph (a) or controlled by a person referred to in paragraph (a), (b) or (c) of the definition non-Canadian in section 2 of the Act.
3 Subsection 3(2) of the Regulations is repealed.
4 Subsection 4(2) of the Regulations is amended by striking out “or” at the end of paragraph (c), by adding “or” at the end of paragraph (d) and by adding the following after paragraph (d):
- (e) the acquisition by a non-Canadian of residential property for the purposes of development.
5 Subparagraphs 5(b)(i) to (iii) of the Regulations are replaced by the following:
- (i) they have 183 days or more of validity remaining on their work permit or work authorization on the date of purchase, and
- (ii) they have not purchased more than one residential property.
Coming into Force
6 These Regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the Act) and the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the Regulations) came into force on January 1, 2023. Since implementing the Act and the Regulations, the Government of Canada, in consultation with impacted stakeholders, has identified several challenges with the interaction between the prohibition and its immigration and housing policy objectives.
The Government of Canada has identified the need to increase housing supply; however, restrictions on foreign controlled corporations set out in the Act are preventing some developers from purchasing vacant land for the purpose of development or from redeveloping residential property. These development activities are needed to increase Canada’s housing supply and improve affordability. In addition, the definitions of mixed-use zoning and control set out in the Regulations are either confusing or overly restrictive and are negatively impacting important development activities. Amendments to the Regulations are needed to clarify and simplify these definitions.
Temporary foreign workers play an important role in alleviating pressures on the labour market in Canada. However, the existing exemption for temporary workers is also too onerous, which is contributing to labour market shortages, especially in rural areas. Amendments are needed to allow more work permit holders to purchase a home.
The Prohibition on the Purchase of Residential Property by Non-Canadians Act
In Budget 2022 (PDF), the Government of Canada announced its intention to prohibit non-Canadians from purchasing residential property in Canada for a period of two years. The prohibition was introduced through the Act, which received royal assent on June 23, 2022, and came into force on January 1, 2023. The Act
- prohibits people who are neither Canadian citizens nor permanent residents from purchasing residential property in Canada for a period of two years, including preventing non-Canadians from using corporate structures to avoid the prohibition;
- establishes penalties for non-Canadians purchasing residential property (and those knowingly assisting them), and allows the responsible minister, following a conviction, to apply to a court for the judicial sale of a property that was purchased in breach of the prohibition; and
- provides authorities to establish specific exceptions, definitions and clarifications in the Regulations, including exceptions for certain groups of people and types of property.
The Prohibition on the Purchase of Residential Property by Non-Canadians Regulations
On December 21, 2022, the Government published the Regulations in the Canada Gazette, Part II, and they came into force on January 1, 2023, along with the Act. The Regulations establish specific exceptions, definitions and clarifications necessary to fully implement the Act. The Regulations
- set out exceptions for certain groups of people from the prohibition in the Act. These include exceptions for temporary residents that are demonstrably working toward permanent residency by studying or working in Canada. These also include exceptions for certain vulnerable populations, such as people fleeing international crises, as well as diplomats, consular staff and members of international organizations residing in Canada;
- clarify the treatment of specific types of residential property under the Act by setting out an exception for recreational property and clarifying the application of the prohibition to vacant land in limited circumstances;
- define the concepts of “purchase” and “control” in the Act. These definitions provide greater clarity around the specific situations in which the prohibition applies. For example, certain unexpected or transitional life situations, such as a divorce or succession process following a death, are excluded from the definition of “purchase” to avoid undue hardship;
- provide further detail around the process set out in the Act whereby a court may order the sale of a residential property purchased by a non-Canadian in contravention of the prohibition. These details are limited to clarifying the conditions under which a court may issue an order, and providing guidance for a court with respect to how any proceeds resulting from a sale would be distributed; and
- clarify that the prohibition in the Act does not apply in circumstances where it would conflict with Indigenous rights recognized and affirmed by section 35 of the Constitution Act, 1982.
The objective of the amendments is to support the Government of Canada’s policy objectives to address residential housing supply that are stated in the National Housing Strategy (NHS) and support Canada’s ability to attract skilled workers and professionals as part of its immigration policies as stated in Canada’s 2023-2025 Immigration Levels Plan. These objectives include improving the affordability of housing and helping to ensure that Canada has the capacity to attract skilled workers and professionals to the country.
The Regulations Amending the Prohibition on the Purchase of Residential Property by Non-Canadians Regulations (the amendments) amend and expand existing exceptions and definitions. The amendments fall into the following four distinct categories:
Definition of “control”
The amendments redefine “control” to increase the control threshold from 3% to 10% so that any corporation or entity with 10% or more direct or indirect ownership of shares or ownership interests by a non-Canadian is subject to the prohibition. The 10% control threshold aligns with the existing criteria under the Underused Housing Tax (UHT).
The amendments repeal the vacant land provision from the definition of residential property so that the prohibition does not apply to vacant land. In other words, the purchase by non-Canadians of vacant land or any other property that does not actually have a dwelling unit on it will be permitted. Vacant land may be used for any purpose by the purchaser, including for residential construction, subject to local building codes and zoning rules. Repealing the vacant land provision would also address the issues that have been raised around the definitions of mixed-use zoning.
Temporary foreign workers
The amendments introduce an exception for temporary workers that enables more temporary residents to purchase a home to live in while working in Canada. Under the exception, the Act would not apply to a temporary resident with a work permit or who is otherwise authorized to work in Canada if
- 183 days or more of validity remains on their work permit or work authorization at the time of purchase;
- they have not purchased more than one residential property.
In addition, the existing exception would no longer require a full-time work condition or tax filing requirement.
Exceptions for purposes of development and publicly traded entities in Canada
The amendments introduce an exception for the acquisition by a non-Canadian of residential property for the purposes of development. This exception allows non-Canadians to purchase residential property for the purpose of development such as commercial, industrial, or residential or any combination thereof. This permits full flexibility for all types of developments subject to applicable zoning bylaws or zoning requirements of relevant local authorities. Furthermore, this amendment also creates an exception for non-Canadian controlled entities formed under the laws of Canada or a province and who are publicly traded in Canada (for example real-estate investment trusts or limited partnerships), to benefit from the exception under the Act afforded to non-Canadian controlled corporations incorporated under the laws of Canada or a province and who are publicly traded in Canada.
Following the coming into force of the Act and the Regulations, the Canada Mortgage and Housing Corporation (CMHC) continued to receive verbal feedback and over 345 emails and correspondence from a broad range of impacted stakeholders. Stakeholders commented on key definitions and exceptions to the Regulations. These include the definition of control and the definition of vacant land as well as the exception criteria for temporary residents and certain types of residential property. CMHC has continued active discussions with impacted stakeholders on these key issues and the amendments are in line with this feedback.
Definition of vacant land: Private firms, legal counsel and associations representing various industries, including commercial and real estate development, banking, natural resources and building materials, as well as real estate professionals enquired about the definition of vacant land in the Regulations, including its application to land municipally zoned for mixed use. Given the broad interpretation of mixed-use zoning in many municipalities, stakeholders also raised concerns that the potential application of the prohibition could extend to commercial or industrial development. Developers also raised concerns about the ability of foreign-controlled corporations to purchase vacant land for residential development and its importance to addressing Canada’s housing supply and improving affordability. The amendments address these concerns by repealing the vacant land provision and adding an exception for property development.
Definition of “control”: Relocation management companies and associations representing developers and legal professionals noted that the definition of “control” in the Regulations could be too onerous or particularly difficult for corporations or other entities to determine. Developers and real estate investment trusts also raised concerns that the definition of “control” could limit their ability to purchase vacant land for the purpose of residential development and to grow Canada’s housing supply. The amendments help address this concern by increasing the foreign ownership threshold in the definition of “control” from 3% to 10%, which would allow corporations and other entities with a larger share of foreign control to purchase residential property in Canada. While raising the threshold to 10% will not fully address the concerns of specific industries, CMHC has assessed that increasing the threshold from 3% to 10% would make it easier for corporations to determine eligibility and fall within the parameters of the Act. The 10% threshold is consistent with the Underused Housing Tax Act, a measure that also applies to non-Canadian owners of residential property. It was assessed that ensuring a consistent threshold would help reduce confusion for corporations or other entities purchasing or developing residential property.
Exception for temporary work permit holders: CMHC heard from several provinces and territories that temporary work permit holders are essential to provinces with labour market shortages, particularly in rural communities, and that the prohibition would impact the competitiveness of Canadian businesses trying to recruit professionals to work in Canada. Through engagement facilitated by Immigration, Refugees and Citizenship Canada, provincial and territorial immigration officials also noted the inability of newcomers coming to Canada through provincial nominee programs to purchase residential property in Canada. These concerns were also raised by businesses, academic institutions, and relocation management companies trying to recruit foreign talent to work in Canada. The amendments address these concerns by streamlining eligibility requirements to enable temporary residents working in Canada to purchase homes within their communities sooner after settling in Canada while also simplifying the process for Canadian professionals that facilitate or support the purchase of residential property by eligible non-Canadians. The amendments require 183 days of validity remaining on temporary resident’s work permit or work authorization at the time of purchase. This period is based on existing Canada Revenue Agency definition of deemed residence for taxation purposes.
Exceptions for purposes of development and publicly traded entities in Canada: CMHC heard from private firms, legal counsel and associations representing developers and other industries that the Act and Regulations were preventing projects that required non-Canadian entities to purchase land with existing properties on them. It was also noted that there was an inconsistency with the exception provided to publicly traded corporations controlled by non-Canadians. To address these concerns, the amendments permit the purchase of residential properties by non-Canadians for the purpose of any type of development, including commercial, industrial, and/or residential. Furthermore, the amendments help ensure fairness for non-Canadian controlled entities formed under the laws of Canada or a province and which are publicly traded in Canada by allowing these entities to benefit from the existing exception afforded to publicly traded corporations controlled by non-Canadians.
Other feedback received: In ongoing discussions and written correspondence to CMHC, real estate, legal and housing finance professionals and their respective associations continue to raise concerns related to the interpretation of key definitions and exceptions in the Regulations and their ability to assist their clients in determining the application of the prohibition in their respective circumstances. Provincial and municipal governments and industry stakeholders expressed concerns regarding the application of the prohibition to residential property that is located within either a census agglomeration (CA) or a census metropolitan area (CMA). The changes to the Regulations would provide more clarity to industry and those professionals that facilitate or support the purchase of residential property by eligible non-Canadians by simplifying some exception criteria. The amendments offer a simplified approach, first, by no longer requiring a full-time work condition or tax filing requirement, and second, by reducing the need to monitor changes in ownership structures by increasing the control threshold. In addition, CMHC intends to revise information on its website to address these concerns.
Given that the Act ceases to have effect two years after coming into force and the feedback received from impacted stakeholders on the need to swiftly implement amendments that are relieving in nature, the amendments are exempt from prepublication in the Canada Gazette, Part I. Taking into account the ongoing discussions and correspondence from a broad range of stakeholders since the coming into force of the Act and the Regulations, it was assessed that prepublication would not result in additional stakeholder feedback of a material nature. Delaying the finalization of the amendments could have impacted efforts to increase Canada’s housing supply or led to increased uncertainty for Canadian employers looking to recruit foreign talent.
CMHC conducted targeted engagement on the proposed amendments with key stakeholders, including provincial and territorial immigration officials and national associations representing real estate, finance and legal professionals and developers. This targeted outreach helped ensure the amendments respond to concerns of impacted stakeholders. Stakeholders also sought clarity on the interpretation of certain exceptions in the Regulations (e.g. non-Canadians’ ability to obtain a mortgage), which CMHC addressed by augmenting its website FAQ.
Modern treaty obligations and Indigenous engagement and consultation
The Act does not apply in circumstances where it would conflict with Indigenous rights recognized and affirmed by section 35 of the Constitution Act, 1982.
Regulatory amendments were selected as the appropriate, legally binding instrument. The amendments pertain to certain exceptions and definitions prescribed in the Regulations. The Act contains specific authorities to make regulations for this purpose; using prescribed regulation-making authorities is consistent with the authority set out in the Act. As such, no other instruments were considered.
Benefits and costs
The amendments are relieving in nature and confer targeted benefits to non-Canadians who have settled in Canada and are working toward permanent residency. The primary beneficiaries include individuals who are working in Canada under existing work permits or authorizations, who are residing in Canada. Direct benefits include enabling eligible non-Canadians to settle in Canada and pursue home ownership in their communities more expediently. These individuals could otherwise experience a more prolonged transition to Canada, as well as less choice or availability in housing options that meet their needs.
The amendments confer indirect benefits to Canadian employers across a variety of economic sectors and industries who seek to attract and retain foreign skilled workers and professionals with work permits or work authorization, who in turn seek to become permanent residents of Canada. Indirect benefits include better positioning of Canadian employers to attract talent across international labour markets, such as skilled workers and other specialized professionals. Absent the amendments, Canadian employers could face competitive disadvantages in attracting foreign nationals with work permits, who may seek to pursue home ownership in the months following their relocation to Canada. The amendments align with the provincial and territorial labour and immigration objectives, which are designed to support Canada’s overall immigration objectives of becoming a desirable destination for foreign talent.
The amendments seek to align with the Government’s policy objective to address Canada’s housing supply in support of housing affordability. Non-Canadians participate in Canada’s development industry as individuals and as shareholders in corporations or other entities. Allowing non-Canadians to build on vacant land or redevelop residential property helps address the residential housing supply issue, thereby contributing to alleviating pressures in supply-constrained markets. Beneficiaries of this amendment could also include Canadians who currently face difficulties finding appropriate housing in low-inventory markets.
Small business lens
Analysis under the small business lens concluded that the amendments will not impact Canadian small businesses. The amendments do not introduce administrative burden or impose new compliance requirements on small businesses.
The one-for-one rule does not apply, as there is no incremental change in administrative burden on business and no regulatory titles are repealed or introduced. The amendments do not impose information collection, processing or reporting requirements on Canadian professionals, nor do they impose requirements with respect to the completion of forms or other types of documentation.
Regulatory cooperation and alignment
The amendments serve to enable non-Canadians who work and reside in Canada to purchase homes within their communities sooner after settling in Canada, while also simplifying the process for Canadian industry professionals that facilitate or support the purchase of residential property by eligible non-Canadians, in support of the effective implementation of the Act and Regulations. The amendments pertain to domestic housing policy in Canada. The Regulations remain temporary in nature and are not the subject of an existing work plan or commitment under a formal regulatory cooperation forum.
Several provinces and territories have indicated that temporary work permit holders are essential to reduce labour market shortages. In order to support provinces and territories’ immigration and labour market policies, amendments have been made to the Regulations to align both policies and approaches at the federal, provincial and territorial levels.
Strategic environmental assessment
The amendments are not expected to result in important environmental effects, either positive or negative.
Gender-based analysis plus (GBA+)
These amendments will allow more non-Canadians who reside and work in Canada to purchase residential properties. This is particularly salient to non-Canadians coming to Canada to work in areas where there are labour market shortages, but where there are not adequate rental market options for housing. In addition, the amendments will allow non-Canadians to purchase vacant land, thereby increasing the potential for development of new housing supply in supply-constrained markets. Furthermore, allowing for more flexibility to develop residential property would address supply issues in the housing market and ultimately benefit low-income Canadians, who are more likely to be pushed out of imbalanced housing markets.
Implementation, compliance and enforcement, and service standards
The amendments come into force upon registration. CMHC will update and expand the plain language guidance and frequently asked questions on its website to reflect the amendments.