Canada’s foreign buyer ban: New changes impact the housing market

Recently announced changes to Canada’s foreign-buyer ban on residential real estate provides new relief to certain non-Canadians looking to purchase a home in Canada.

In a December blog post, we discussed the impact of the regulations (the “Regulations”) under the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) and the two-year ban on foreign buyers purchasing certain residential real estate in Canada, which began on January 1, 2023 (the “Ban”). Further to this, the Minister of Housing and Diversity and Inclusion recently announced certain amendments to the Regulations (the “Amendments”), which took effect on March 27, 2023 (the “Effective Date”).

The Amendments offer more flexibility to newcomers and businesses looking to add to Canada’s housing supply and allow a greater number of non-Canadians to purchase residential real estate in Canada in certain prescribed circumstances.

A new definition of “control”

In our previous post, we noted that persons who meet the definition of “non-Canadian” under the Act are subject to the Ban, including corporations that are “controlled’ by foreign corporations. The Regulations previously defined “control” as generally (1) control in fact, or (2) the direct or indirect control of the ownership interests of an entity representing 3% or more of the entity’s equity value or carrying 3% or more of its voting rights (the “Control Threshold”). This set a very low threshold for corporate control as compared to other definitions of “control” found in Canadian corporate law.

However, the new Amendments increase the Control Threshold from 3% to 10% to bring the Regulations in alignment with definitions in other Canadian legislation, including the Underused Housing Tax Act (Canada).

Holders of work permits and refugees

The Amendments also provide relief under the Ban to refugees and certain work permit holders seeking to purchase a home while working in Canada. In our previous post, we noted that certain “temporary residents” of Canada would be exempt from the Ban if they held a work permit or were authorized to work in Canada under the Immigration and Refugee Protection Regulations, provided that they: (1) worked full-time in Canada for three out of the last four years preceding the year in which the residential property was purchased (the “Work Experience Requirement”); (2) filed all required income tax returns for three out of the last four years prior to the purchase (the “Filing Requirement”); and (3) did not purchase more than one residential property (the “One Home Limit”).

Pursuant to the new Amendments, refugees who are entitled to work in Canada under the Immigration and Refugee Protection Regulations, and work permit holders who have 183 days or more remaining on their work permit at the time of buying a home, will be allowed to purchase residential property in Canada as of the Effective Date. In addition, while the One Home Limit remains in place, the Amendments eliminated the Work Experience Requirement and Filing Requirement.

Exemption for development purposes

The Amendments also provide a new exemption for non-Canadians purchasing residential real estate in Canada for the purpose of development and clarify that entities formed in Canada whose shares are listed on a designated Canadian stock exchange are exempt from the definition of “non-Canadian” under the Act. As a result, non-Canadians may now purchase residential real estate in Canada for the purpose of development, and certain entities, including publicly traded real estate investment trusts, are now no longer subject to the Ban as of the Effective Date.

Vacant land

The Amendments also repeal section 3(2) of the previous Regulations, so the Ban no longer applies to vacant land zoned for residential and mixed use. Consequently, vacant land that is zoned for residential or mixed use may now be purchased by non-Canadians and utilized for any purpose, including for the purpose of developing residential real estate.

For further information on the current state of the Ban and how the Act, the Regulations and the Amendments may affect you or your business, please contact a member of our Real Estate Group.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.