CREA wants Ottawa to allow people to use their RRSP to help their offspring buy a home

VANCOUVER (NEWS 1130) – As the Canadian Real Estate Association asks the federal government to allow people to use their RRSP to help their kids buy a home, one economist warns there could be unintended consequences.

The formal ask is for Ottawa to extend the Home Buyers’ Plan to allow so-called intergenerational RRSP loans. The CREA says this would allow parents to help their children break into the market and buy their first home.

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The agency represents more than 100,000 agents, brokers and salespeople, and has made a 2018 pre-budget submission proposing changes to the Home Buyers’ Plan (HBP). That program allows a first-time buyer to withdraw up to $25,000 from an RRSP to purchase or build a home. Both parents would be eligible to take funds from their accounts, subject to a maximum amount.

Tom Davidoff with UBC’s Sauder School of Business says in some cases it could make sense, but there could be knock on effects. “This can push up home prices, anything you do to reduce the capital cost of buying a house is, of course, going to make a home more expensive.”

He adds the unintended consequences could cause major problems down the road. “In terms of distribution, this probably takes from the low-end and gives to the high-end, which we generally don’t like. And a lot of the benefit in a market like Vancouver will be captured by sellers because homes get more valuable when housing is tax favoured.”

Davidoff adds if home prices did rise as a result of the plan that would essentially be a transfer from less well-off families to wealthier ones.