In Canada, new legislation sent shockwaves through the global mobility industry – specifically, The Prohibition on the Purchase of Residential Property by Non-Canadians Act. Effective January 1, 2023, it bans non-Canadian individuals and corporations from purchasing residential real estate for two years (to Dec 31, 2024)– an attempt to cool a market that has run scorching hot for the past three years.
Regrettably, this new legislation has numerous unintended (and significant) consequences, many of which directly impact the mobility industry. Last month, the Canadian Employee Relocation Council hosted a live session with a panel of mobility experts – including our own Canadian Regional Vice President, Ann Stafford – to share insight on the effects of the Act on temporary foreign workers, intra-company transfers, and employee relocations managed by non-Canadian organizations.
Their discussions uncovered some startling realities about what workforce mobility will look like across Canada over the next two years. Staying informed will be your best tool to plan proactively, adjust your strategy, and ensure that your mobile employees have the resources to overcome any challenges that this legislation may present. To get you started, here are the top things this session taught us about the impact of this ban:
As a country that relies heavily upon immigration to fuel economic growth (and, more broadly, population growth), a change in the Canadian brand will undoubtedly stunt the county’s ability to attract foreign talent and meet these goals.
With this legislation, the risk is, first and foremost, that it can lead to a permanent negative change in the value of the Canadian brand as a welcoming, progressive, diverse, tolerant society that wants to attract people from all around the world to call home.Michael Bourque
This leads to our second point…
Exactly how much does Canada rely on foreign talent? A whole lot: immigration accounts for almost 100% of Canada’s labor force growth, and by 2032 it’s projected to account for 100% of Canada’s population growth. The country also relies on foreign talent to help meet the needs of Canadians today – for instance, 36% of physicians in Canada are immigrants. Panelists agreed that much of the best and brightest talent will be unwilling to rent over the next two years and may abandon future plans to call Canada home, leaving sizable gaps in critical services.
Borque said this is already happening in the Maritime region, where an MP expressed concern that the province is struggling to retain talent as workers are threatening to leave if they cannot purchase property.
As well as impacting the employee experience by erecting some major hurdles for incoming talent, the new legislation also impacts outgoing talent! That’s because it prevents a non-Canadian RMC from buying the home of a transferred employee and selling it to a third-party buyer – a process known as a Guaranteed Buyout, which allows the employee to move to their destination without worrying about the home sale process, and which also drives considerable tax savings. Discussion continues concerning the interpretation of a homesale purchase that is intended to be restricted by the Act while mobility industry proponents and CERC maintain an active dialogue with legislators and regulators to call attention to the need for formal exemption relief.
It’s no surprise that rental and temporary housing is already in short supply – an issue which is certainly not limited to the Canadian market – and this ban will undoubtedly put significant pressure upon an already limited inventory. Stafford shared the story of a current client who is looking to make a group move from the US into a remote area of Ontario– which would provide a significant economic injection into an underserviced region. But they are being roadblocked by the lack of available rental housing in the area. If incoming employees don’t have the option to purchase homes in the area, there will be nowhere to house them, and the project will ultimately be paused. This is just one example of what will happen across the country over the next two years, and the overall impact will be palpable.
And this unaffordability stems from a real lack of housing supply across the entire continuum. The experts on this panel agreed that there needs to be a shift in focus from preventing foreign ownership to working together to create more supply. Anecdotally, similar policies have yet to prove to be effective in other parts of the world, most notably New Zealand*.
At present, foreign buyers only account for 2% of home purchasers in Canada. So even if the ban prevented this minority from accessing the market, it wouldn’t be enough to impact supply or affordability.
Currently, many corporate mobility managers are adopting a case-by-case approach to evaluate each transferring family’s situation and ensure they are aware of the legislation and the solutions the client offers. Managers should also engage with key internal stakeholders, like business unit partners, to ensure that they are abreast of the implications of the Act before initiating or considering a relocation package (particularly one that involves a home purchase benefit). Setting expectations early and stressing communication with every stakeholder as decisions are made will help protect the employee experience.
The silver lining: CERC continues to work closely with Canadian authorities to seek exemptions for the relocation industry, including foreign nationals with bone fide job offers and work permits and real estate transactions for employer-sponsored relocations. We’ll continue to keep you informed with updates as they surface, but in the meantime, if you have any questions about the impacts of this legislation on your mobility program, talk to us.
*New Zealand introduced similar legislation in 2018 – a ban on foreign buyers purchasing residential property in the country – to help simmer an overheated real estate market. Years later, economists claim that the ban had little impact on the direction of the market, especially since foreign buyers comprised a marginal percentage (less than 3%) of buyers when it went into effect.
Source: CBC Radio Canada.