Mr. Speaker, it is a privilege to rise to support the bill brought forward by my colleague, the member for Delta—Richmond East. He is to be commended for not only identifying a situation that could be improved, but he has also offered to the House the means to provide that improvement.
Bill C-520 is an act to amend the Income Tax Act with respect to the home buyers' plan. It is a simple bill with a clear intent to make housing more affordable for Canadians by increasing the maximum amount that can be withdrawn from a registered retirement savings plan to be used under the home buyer's plan.
Home ownership is a dream and a goal that is just about universal. When young Canadians finish their education and head out into the workplace for the first time, they need a place to live. For most, this is the first time they are truly living independently from the parents and it is a challenging experience.
With the first job, frequently comes the first apartment, most likely to be shared, to be affordable, but still it is a rented space that is a place to live, not really a place to be considered a long term home. It is a way station in life, not intended to be permanent. The permanency comes with home ownership, a place that can be truly called their own.
Owning a home is something to which most Canadians aspire and purchasing a home is usually the biggest financial transaction most of us will make in our lives. With the passage of this bill, that dream and goal of owning a home would become a little more possible for many Canadians.
The home buyers' plan was first introduced in February 1992 by the Conservative government. The wisdom of the program is self-evident and the subsequent government kept it in operation. The idea was and is to encourage and reward thrift by allowing individuals to withdraw money from their registered retirement savings plans, tax-free, as long as the money is used for a down payment on a first home and is re-deposited to the RRSP over a period of 15 years. The maximum amount that can be withdrawn for an individual is $20,000.
The repayment plan is within the means of most Canadians. The participants have 15 years in which to repay the amount they borrowed from their RRSP or face paying taxes on the money as income. That is certainly manageable with careful budgeting, especially given that the participants have already shown that they know how to save since they managed to save the money in the first place.
However, since the introduction of the home buyers' plan, about 1.5 million Canadians have taken part in the program, borrowing more than $15 billion from their RRSPs to be used as a down payment on that first home.
This is an example of a government program that works the way it should. There has been no need for extensive advertising to convince people that this is a good idea. Right from the beginning, Canadians embraced the home buyers' plan. Canadians understand the need to plan for the future and the importance of owning their own home is part of that plan.
The existence of the home buyers' plan has encouraged young Canadians to start planning for the future at perhaps an earlier age than they would have otherwise, opening RRSPs with the intent of using that money as down payment for their first home under the home buyer's plan.
Saving for the future is not as common as it once was. Statistics Canada tells us Canadians are not as thrifty as they were a generation ago. A personal savings rate is a fraction of what it once was, which makes the savings that come from an investment in a home even more important. Any decline in savings is a matter of some concern and it is good to encourage Canadians to prepare for their futures.
Programs like the registered retirement savings plan and the home buyers' plan encourage thrift, which should help provide for more pleasant golden years for our senior citizens, not to mention the joys of home ownership when that first home is purchased.
The hon. member for Delta—Richmond East is to be commended for the bill which will further encourage Canadians to plan for the future. I know he is well aware of the success of the home buyer's plan and is equally aware of how housing prices have soared in the country since the plan was first introduced in 1992.
In 1992, when the home buyers' plan was started, the average price of a house in Canada was $149,000, but by the year 2006 that number had risen to $276,000, and that is more than an 85% increase.
In Edmonton the average sale price of a house was $109,000 in 1992, considerably below the national average. By 2006, in just over a decade, that average cost had risen to $250,000, a 228% increase.
However, the maximum amount allowed to be withdrawn from an RRSP under the home buyers' plan remains unchanged since 1992 at $20,000. It seems to me that given the increase in housing prices in the past 16 years, that an increase in the maximum is in order, and the hon. member for Delta—Richmond East has proposed in the bill a very reasonable increase to $25,000.
Buying a house today means spending more money than when the home buyers' plan was first introduced in 1992. By supporting the bill, the House is acknowledging that reality and doing its part to encourage Canadians to be thrifty.
We all are aware of the economic difficulties that have plagued the housing industry in the United States in the past couple of years. Thousands of first time home buyers have lost their homes, in many cases literally abandoning properties they could not afford to keep.
The economic fallout from the situation of subprime mortgages and asset-backed commercial paper has had a ripple effect throughout the entire American economy and indeed around the world.
Perhaps, if the United States had a different model for home ownership, and perhaps, if it had a home buyers' plan such as Canada, its housing picture would not be as bleak.
The home buyers' plan encourages potential homeowners to save for their purchase. By making a substantial down payment they not only reduce their monthly mortgage payments but immediately will have built up some equity in their property, equity that can be used as collateral if their circumstances change.
In the United States, those who are abandoning their homes frequently bought their homes with the minimum or no down payment and were unable to build up any equity in those homes before interest rates rose and housing prices dropped. They were unable to meet the payments and could not sell the homes for what they owed. It is small wonder that they walked away from their purchase. They really had nothing invested in it.
I have noted with concern that some lenders in Canada have adopted similar measures to make housing more affordable for first time buyers. The traditional 25-year mortgage can now be stretched to 40 years, and the down payment that used to be 25%, then 10%, can now be 5% or even 0%. While that may make purchasing a home easier, it does not always make keeping that home easier.
The home buyers' plan does make keeping that first home easier. It encourages thrift and responsibility, two notable Canadian values.
Certainly, there is support for the bill from across the country. It makes sense that a good idea such as this one is being endorsed by real estate industry groups and financial organizations, as well as Canadians in general.
As a nation we have encouraged our citizens to prepare for their retirement. This marriage of real estate and the registered retirement saving plan is a logical one. Real estate generally appreciates in value and certainly in the long term it is usually cheaper to own than to be paying rent for the rest of one's life. When the mortgage is paid off, hopefully before individuals retire and their income drops, their monthly expenses go down.
It seems wise for the House, therefore, to adopt the idea of the hon. member for Delta—Richmond East and increase the limit that can be applied to the home buyers' plan.
For the participants, this is a matter of short term pain for long term gain. In fact, one can argue there really is no short term pain involved here. Assuming the home buyer follows through with the 15-year repayment schedule, what is lost is the interest the money would have accrued over that 15-year period. But that is counterbalanced by the savings involved in being able to make a larger down payment on a residence than would otherwise be possible. As I see it, both the home buyer and the country comes out ahead.
To summarize, it is my honour and privilege to support the bill brought forward by the hon. member for Delta—Richmond East. I commend him for his forethought and urge the House to consider it favourably.
