Government Support of Homeownership in Other Countries

Critics have said that governments in countries with homeownership rates similar to those of the U.S. don't subsidize homeownership, so why should the U.S.? In many cases, that’s just not true. Here are some examples of how other governments support to encourage homeownership.

Canada

Homeownership rate: 68.4%

• Canadian homeowners can deduct the interest on a mortgage on a home used as a rental property (there are exclusions for passive activity on the home).
• There is an indirect way that Canadian homeowners can get an MID:
  • Called an “asset swap”
  • Owner sells his/her investments, purchases a home in full or in part by the sale, obtains a mortgage on the home, then buys back their investments with money from the mortgage
  • 2001 Supreme Court of Canada case decided this – Singleton vs. Canada
  • Through an asset swap the interest on a  mortgage is deductible
• Canadians have about 70% equity in their homes on average (i.e. 30% mortgage debt), compared to 45% average equity by U.S. homeowners.
• Mortgage rates in Canada are fixed for a statutory maximum of 5 years – after that they expire and the rate is renegotiated.
• In Canada there is no tax advantage to converting home equity into debt (in the U.S. there is).
• Canada offers a first-time homebuyer tax credit ($5,000) on all homes that are closed on or after January 27, 2009.
• Home Buyers’ Plan – government sponsored program that allows Canadians to withdraw funds from their Registered Retirement Savings Plan to buy or build a qualifying home for themselves or for a related person with a disability.
• Canada Mortgage and Housing Corporation
  • Canada’s national housing agency
  • Established as a government-owned corporation in 1946
  • Provides mortgage loan insurance, mortgage-backed securities, housing policy and programs
  • Provides funding and consultation for affordable housing
• Canada Mortgage and Housing Corporation offers homeowners a 10 percent “green refund” on mortgage loan insurance premiums for buying or building an energy-efficient home. Also available for homeowners who made energy-saving renovations to their existing home.

Sources: Canada Mortgage and Housing Corporation; Canada Revenue Agency

Australia

Homeownership rate: 68.3%

• Australia offers a first-time homebuyer grant ($7,000). This is a national program funded by the states and territories and administered under their own legislation. The government began offering the grant in July 2000.
• In 2008 the Australian government introduced the “First Home Owner Boost” providing additional money to homeowners (on top of the initial $7,000 grant) who signed contracts on or after October 14, 2008 and on or before December 31, 2009. Homeowners who met certain criteria received up to an additional $7,000.
• Mortgage Relief Fund – a government initiative that provides repayable interest free loans to the borrower who is experiencing short term mortgage stress due to an unforeseen change in circumstances. This change includes loss of employment, sudden illness or injury within the last 12 months.
• Other government-funded homeownership programs include
  • Home Buyer Concession where the duty on a home is charged at a concessional rate
  • Defer Duty where homeowners can defer paying the duty on their home
  • Affordable house and land packages

Sources: ACT Revenue OfficeGovernment Support of Homeownership in Other Countries

Finland

Homeownership rate: 67%

• Kela (The Social Insurance Institution of Finland) provides a Housing Allowance for low income homeowners which covers part of the recipient’s housing costs. It is available for both rented and owner-occupied housing. A certain share of the housing costs is payable by the recipient.
• Homeowners in Finland can apply for an interest subsidy loan which is granted by a bank or other financial institution. The Housing Finance and Development Centre for Finland accepts the loan thereby giving the loan a state guarantee and paying the
• interest subsidies. The interest subsidy loan covers a maximum of 90-95 percent of building costs and price of the plot.
• The Housing Fund of Finland gives repair grants to homeowners who improve the condition and quality of their home. Grants can be issued for reducing energy consumption as well.
• Finland tax benefits:
  • 28% of the loan interest can be deducted from the income tax payable
  • First-time homebuyers are exempt from the property transfer tax, which is 1.6% of the acquisition price in the case of housing company dwellings and 4% in the case of a single family house
  • First-time homebuyers can deduct mortgage interest payments from income tax at a higher percentage than others (29% instead of 28%).
• ASP Scheme – government sponsored saving system for young people buying their first home.
  • A potential homeowner between 18 and 35 years old can enter the program
  • The ASP Scheme consists of pre-saving and a housing loan with interest subsidy
  • A minimum saving is 15% of the acquisition price of the home and the minimum saving period is two years
  • The interest on the saving is 1% + an additional interest of 2-4% additional interest agreed with the bank
  • Interest paid on the savings is tax free
  • The ASP loan is interest subsidized by the state during the first six years

Sources: Kela; ARA, The Housing Finance and Development Centre of Finland