Why Canada's ban on foreign buyers hasn't made homes more affordable

Kris Wallace and Andy Ali of Vancouver say their search for a larger condo to give their family more room has been frustrating. Real estate and rental costs in the city are so high that their 26-year-old daughter is still living with them and they're all feeling the squeeze.

A year ago, the federal government instituted a foreign buyer ban after passing the Prohibition on the Purchase of Residential Property by Non-Canadians Act in 2022. The two-year ban, which came into effect on Jan. 1, barred non-citizens, non-permanent residents and foreign controlled companies from buying up Canadian property as an investment.

But Wallace says that ban didn't do much for her family.

"There's all of these very luxurious buildings going in all around us that are outrageously priced," said Wallace, after attending an open house at a promising $1.1-million condo. "The foreign buyers tax … I don't think that's making an iota of difference."

Critics say the foreign buyers ban, which was aimed at making housing affordable for Canadians, had many exemptions and was more of a political manoeuvre. They say it's clear housing remains out of reach for too many in Canada, and that the country should look to other places in the world to find strategies to foster home ownership.

Though Housing Minister Sean Fraser's office declined an interview request, his spokesperson said the government had worked with cities across the country to help "over 250,000 new homes get built over the next decade." Earlier this month, the government announced a deal with Vancouver — $115 million to fast track the building of 40,000 homes in coming years.

In an email, the Canadian Mortgage and Housing Corporation (CMHC) said 2023 data from the Canadian Housing Statistics Program is not yet available to determine the ban's full effect.

The CMHC said Ottawa is "working to ensure every Canadian … has an affordable place to call home," citing moves to forgive GST from newly constructed rental units, $20-billion in apartment financing and other initiatives.

In Vancouver late last month, Deputy Prime Minister Chrystia Freeland said the ban "is making a difference" by preserving housing where people can live. Earlier in November, Conservative Leader Pierre Poilievre said that rather than helping to make housing affordable, the government's policies have instead "made the problem worse."

The housing minister acknowledged the housing crunch earlier this month, but challenged Poilievre's strategy. "He seems content to tap into the anxiety of Canadians without putting forward a plan that's actually going to help them," said Fraser. 

CMHC data reveals that only two per cent of real estate purchases in 2021 were made by non-Canadians, according to communications obtained by Global News through Freedom of Information.

A few months after the ban was put into place more exemptions were added. These included students, first-time buyers and properties under $500,000.

"There were so many exemptions to the foreign buyer ban that it really didn't make any difference at all," said Tim Sabitov of Team 3000 Realty Ltd, in Vancouver.

Any impacts of the ban were short-lived, according to Brendon Ogmundson, the chief economist for the B.C. Real Estate Association. "The foreign buyer ban was more political than economic policy or housing policy," he said.