The announcement of the Federal Budget is a marquee event in the economic and political calendar. A fun and notable tradition surrounding this event is for the Finance Minister to buy a new pair of shoes before presenting the budget. The type and brand of shoe has typically symbolized the theme and overall message of the budget. In 2022, Chrystia Freeland purchased a pair of discounted black pumps, which were described as “comfortable, practical and on sale”, which reflected her comments surrounding the last budget. This year, the Finance Minister chose a pair of shoes from Maguire Shoes, a millennial owned business based in Montreal. The presumed messaging was that government was committed to address challenges faced by the younger cohort, and restore “generational fairness” for millennials and Gen Z. Her tweet on the social platform X showcased the budget’s commitment:

Housing affordability has been reported to be a source of anxiety amongst the younger generation. In the latest budget proposal, $8.5 billion of the projected $53 billion in new spending is earmarked to assist in increasing the supply of homes. This is meant to help fulfill the promise of 3.9 million new homes by 2031. Further housing commitments include top ups to the Apartment Construction Loan Program, the Canada Housing Infrastructure Fund, the Housing Accelerator Fund and increased funding towards modular and prefabricated homes. The budget also proposes to use more public lands for a potential 250,000 new homes. With the lack of supply being the root cause of what some consisder a housing affordability crisis, these measures aim to incentivize development of more rental units and housing.

Renters have been targeted by the Federal Government as a group that could use further assistance. Recent initiatives include a Canadian Renters’ Bill of Rights and a tenant protection fund help reduce the impact of rising rents or "renovictions" (ie. when a landlord evicts a tenant for the purpose of renovating the unit). An initiative to have a renters’ payment history count towards their credit score could also help renters better qualify for a mortgage when they are prepared for home ownership. Finally, increasing the withdrawal limit for the Home Buyer’s Plan, can also help the first-time homebuyer. This proposal would permit individuals to borrow up to $60,000 from their RSP account tax free to purchase a home; And for those withdrawals between Jan 1, 2022 and Dec 31, 2025, the repayment grace period would be extended to five years.

One of the hottest topics to come out of the budget has been the proposal to increase the capital gains inclusion rate. Increasing the tax revenues from capital gains is one way to help fund the increased spending, but it also fits with the spirit of “generational fairness’ by having wealthier Canadians pay more tax. According to Rachel Aiello, Senior Parliamentary Reporter from CTV News, these increased taxes will target the wealthiest 0.13% of Canadians with an average income of $1.4million and could raise $19.4 billion over five years. Those individuals with more than $250,000 in capital gains in a year will face an increase in the capital gains inclusion rate to 66% (from 50%). This inclusion rate will also apply to the first dollar of capital gains realized by corporations and trusts. This is expected to impact 12 per cent of Canada's corporations. With capital gains taxed more heavily, this also has the ability to complement their rental and tenant protection initiatives as some landlords may reconsider liquidating or “renovicting” if their property has accumulated sizeable unrealized gains.

For many clients whose children are struggling to buy their first home, this budget was intended to assist them. What remains to be seen is whether these proposals are effective, or just barely scratching the surface. Canadians have learned to not hold their breath on government execution regardless of which party they have an affinity towards. Ultimately, having a parent assist in purchasing a child’s first home is likely a trend that will continue. Still, these become family decisions that should take into consideration family law, legal ownership issues, taxes, and potential financing plans. In all, performing a financial plan for both parents and the child individually is recommended. Speak to one the advisors on our team to review the importance and implementation of intergenerational wealth planning.