Federal housing policy is changing direction. After decades of programs designed to help more Canadians buy homes, the Carney government is trying something different: building housing that stays outside the regular market.

This isn't just Ottawa politics. These shifts affect how buyers think about timing, how investors calculate returns, and what kinds of properties come to market. Understanding what's driving these changes helps you make better decisions about your own situation.

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The Economic Argument Behind the Shift

Here's what policymakers are looking at: in 2022, 38% of all investment in Canada went to housing. That's the highest rate among wealthy countries. Germany came second at 33%. Everyone else stayed under 30%.

That number caught attention because it represents a choice. Money flowing into residential real estate is money not going to business equipment, research, technology, or industrial expansion. From 2000 to 2022, Canadian business productivity grew at half the rate of American businesses. Between 2019 and 2022, the gap got worse.

Economists see a connection. When housing prices climb, companies with real estate on their balance sheets get easier access to credit. Banks love property as collateral. But that means capital flows to firms that own buildings, not necessarily to firms creating the most value or innovation.

For the average person, this played out as a simple calculation: buying real estate looked like the safest path to building wealth. Especially when interest rates stayed below 2% for a decade.

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Why This Became a Policy Priority

Between 2001 and 2023, borrowing costs stayed historically low. Interest rates sat below 5% for 23 years, including a full decade below 2% from 2008 to 2022. That environment made mortgages incredibly cheap and influenced how everyone thought about investment.

Federal programs reinforced this direction. First Home Savings Accounts, the Home Buyers' Plan, GST rebates, tax credits. Each initiative aimed to help Canadians buy homes. Together, they made residential real estate the default wealth-building strategy for millions of people.

In markets like Kelowna, you saw the results. Properties moved faster. Multiple offers became common. Investors timed purchases around rate announcements. Housing went from primarily shelter to a financial asset class.

That worked well when rates stayed low and prices kept climbing. But it created vulnerabilities. High household debt. Affordability challenges for younger buyers. And from an economic policy perspective, concern that too much capital was flowing into real estate at the expense of business investment that drives productivity growth.

International economic organizations started highlighting the pattern. Canada's productivity lagged comparable countries partly because capital allocation favored housing over the machinery, research, and innovation that make workers more productive and businesses more competitive.

The Carney government decided to try a different approach.

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What the New Budget Proposes

Mark Carney's first budget as Prime Minister committed $13 billion over five years to Build Canada Homes, a new federal agency focused on expanding non-market housing.

Non-market housing means social housing, non-profit co-ops, and community housing where rents stay controlled by non-profit or municipal organizations. Right now, these represent just 3.5% of Canadian homes. The average across wealthy countries sits at 7.1%. France has 14%. The UK has over 16%.

The goal is to add roughly 576,000 affordable units by reaching that international average. Build Canada Homes will start with 4,000 homes across six cities: Dartmouth, Longueuil, Ottawa, Toronto, Winnipeg, and Edmonton. The broader target includes 45,000 non-market homes on federal lands nationwide.

The agency plans to use prefab construction and modern building methods for faster, cheaper development. The budget adds $75 million over three years for construction training to expand the skilled labor pool.

For regular market purchases, the government eliminated GST on new homes under $1 million for first-time buyers, with reduced GST between $1 million and $1.5 million. In Kelowna, where new construction often falls near these thresholds, the savings vary significantly by property type and price.

The strategy aims to stabilize prices through increased supply rather than demand stimulation. More affordable rental options could shift some renters who might've stretched to buy, potentially easing competition for entry-level properties in markets with significant investor activity like Kelowna.

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The Economic Case Government is Making

The policy shift rests on economic research. Studies found that bringing Canada's community housing to international averages could boost productivity by 5.7% to 9.3%, potentially adding $67 billion to $136 billion to GDP.

The mechanism works through several channels. Affordable housing near employment centers reduces commute times and matches workers to better-fit jobs. Stable housing improves educational outcomes for children and allows adults to focus on work rather than housing instability. Lower rent burdens free up income for education, training, or business investment. Reduced housing stress improves health outcomes and workplace productivity.

When someone spends 60% of their income on housing, they're in survival mode, not building skills or taking career risks. The argument goes that more affordable housing options expand economic participation and productivity.

Whether these projections hold depends on execution. Building hundreds of thousands of units takes years. Labor constraints, material costs, and construction timelines all create uncertainties. The Parliamentary Budget Officer projects overall federal housing spending will decline 56% from $9.8 billion this year to $4.3 billion by 2028-29 as existing programs expire, with Build Canada Homes estimated to deliver just 26,000 units by 2029-30.

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The Implementation Challenges

Large-scale policy shifts face predictable obstacles. This one involves multiple competing interests.

Homeowners have built retirement plans around home equity as traditional pensions disappear. Policies that might slow or reverse price appreciation affect their financial security. Developers operate on business models that assume continued price growth. Banks structure mortgage portfolios around market housing.

These aren't abstract interests. They're voters, donors, and businesses with real stakes in policy outcomes.

Jurisdiction complicates things further. Housing involves zoning, building permits, and land use, areas where provinces and cities traditionally govern. Federal involvement, regardless of intent, can trigger constitutional and political pushback.

Funding timelines create uncertainty. While Build Canada Homes adds new money, several existing housing programs are expiring. The net effect over the coming years depends on implementation speed and political commitment across election cycles.

Construction capacity presents another constraint. Canada's skilled trades already face shortages. Ramping up non-market housing construction while private development continues requires expanding the labor pool significantly, which takes time even with training investments.

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What This Means for Your Decisions

Federal policy shifts affect local markets, but the timeline and magnitude remain uncertain. If Build Canada Homes delivers on its targets over the next decade, markets like Kelowna could see changes in rental availability, investor activity, and price dynamics for certain property types.

More affordable rental options might reduce some buyers who were stretching their finances. That could ease competition for entry-level properties. Conversely, if non-market housing construction lags projections, demand pressures continue largely unchanged.

The GST exemption for first-time buyers on new homes under $1 million creates immediate savings for qualifying purchases. For investors and move-up buyers, the calculation depends more on long-term supply dynamics and whether federal policy actually shifts capital flows as intended.

Real estate remains a tangible asset with intrinsic value, shelter. Unlike stocks or bonds, you can live in it. And historically, Canadian real estate has proven relatively stable even through policy changes and economic cycles. The question isn't whether housing retains value, but how different property types and price points respond to changing supply conditions and policy incentives.

Understanding these broader forces helps with timing decisions, property selection, and financial planning. Policy creates context, but individual situations vary. If you're considering buying, selling, or repositioning your real estate holdings in the Okanagan, our team at Coldwell Banker Horizon Realty can help you navigate what these federal changes mean for your specific circumstances in Okanagan's market, both now and over the next several years as policies unfold.