The shelter shelter

Poor Gary is 44. “I’m kind of livid about it, to be honest,” he says.

Yeah, being in your mid-forties is inching relentlessly towards eternity. Male pattern baldness. Love handles. Things loosening and falling off in the shower. It’s awful.

And now, of course, the prime minister’s officially embraced ageism, drawing a thick red line between the kids (under 40) and the walking dead. It all comes down to the FHSA.

“Is there a precedent for this kind of thing?” Gary moans. “If I understand correctly, a 38 year old about to buy a house, could put 40k into an FHSA, net the 16k back (assuming a 40% tax bracket)… buy a house at 39… with the money and NOT have to pay the 16k?”

It seems like this is a 16k GRANT only for first-time home buyers… but only under 40 years old. How does this address affordability? A 41-year old (or a 44-year old like myself) has to pay an additional 16k? Can you think of any reason why an age limit of 40? Wouldn’t it make sense to offer this grant (for that is essentially what it is) to ANY 1st-time home buyer?

Okay, so this is reasonably outrageous. It bears revisiting so we all understand on September 20th just what the First Home Savings Account would be, how it works, and the historic financial discrimination it embraces.

The Libs say this:

Young Canadians want the chance to own their home—just like their parents and grandparents did. But higher rent and the increased cost of living are making it harder and harder to afford a down payment.
A re-elected Liberal government will:
*  Introduce a tax-free First Home Savings Account will allow Canadians under 40 to save up to $40,000 towards their first home, and to withdraw it tax-free to put towards their first home purchase, with no requirement to repay it.
Combining the features of both an RRSP and a TFSA, this plan would allow young Canadians to set aside 100% of every dollar they earn up to $40,000 and shorten the time it takes to afford a down payment.

In practical terms this means an employed 30-year-old earning $80,000 could get a loan from the Bank of Mom for $40,000, invest it in her FHSA and (because all contributions are deductible) receive a refund of about $12,000. She could dump that in her TFSA and hold growth ETFs. Ten years later the $52,000 has become $104,000 and she buys a house using it as a downpayment. So forty grand turns into a hundred thousand with no tax payable, plus there was an outright gift of $12,000 from taxpayers. If she has dumped the $12,000 into her RRSP the gift would be even larger, and the withdrawal still tax-free under the RSP Home Buyer’s Plan.

So the FHSA is an age-specific tax shelter offering tax-deductible contributions, free money from the government, taxless growth and non-taxed withdrawals to buy a house that can appreciate and provide untaxed capital gains. In addition, refunds for contributions can be reinvested in another tax shelter for a second refund on the same money. It’s a gift. Anybody under 40 not playing this game has had their cortex fried watching too many Jag TikToks.

More importantly, it would create a potentially vast pool of publicly-subsidized capital which could be used to ensure increased demand for real estate and a further escalation in the price of homes. Oh yeah. As Gary laments, it’s also unfair. So just imagine the impact if the Libs cave to such a valid criticism and make the FHSA available to everybody wanting to purchase a first property. Uppa, uppa.

By the way, if a 40-year-old utterly fails at life and doesn’t buy real estate (the only true measure of adulting) the FHSA loot folds directly into an RSP where it can continue to grow without tax – and still be taken out (up to $35,000, or seventy grand for a couple) at any time for a down payment. This is the only time a retirement savings plan can be plumped up without regard to earned income. That’s a big departure. So is the fact that $40,000 can be put immediately into a FHSA while it would take almost seven years to do the same with a TFSA. For, like, old dying people in their late forties.

In short, outrageous. Discriminatory. Ageist. Non-inclusionary. And it’ll make house prices more stupid.

Meanwhile, the government offering enhanced savings, double-refunds and a fatter, accelerated, fast-track TFSA so young people can swallow crushing debt and inflate real estate is the same one that gutted contributions for folks trying to stand on their own.

Yeah. Livid.

About the picture: “My wife and I bought a slanted Semi in Leslieville in 2017 and turned it into a Triplex,” writes James. ” We rent the basement and main floor apartments and live in the upper 2 bedrooms.  Luckily for us property prices have gone up since we bought and we re happy where we are.  We re just wondering if all the people selling rental units now know something we don’t!  I imagine we will see an increase in property tax coming up as they re asses prices in the coming years. And here is a pic of our family dog, Piney.”