The death watch

Carney’s a numbers man.

Trudeau was a nice-hair-tats-bleeding heart-seriously-unfinancial-Katy Perry-canoe-friendship-bracelet kinda guy. And did I mention financially unserious? That, too.

So only a numerically confused administration like Justin’s could have come up with something as weird as the FHSA. Instead of dealing effectively with the root causes of a housing problem, the feds conjured up with a crazy plan to (a) increase demand for housing, (b) reduce badly-needed government revenues and (c) discriminate among Canadians, instead.

For said reasons, the FHSA may be a short-lived phenom. Carney knows better.

As you realize, the First Home Savings Plan was hatched three springs ago as a mechanism for houseless, moany young buyers to help fund a downpayment. Yes, they could already sock away $60,000 (or double that for a couple) in an RRSP, get a tax break for doing so, then use (without tax) all the money for a property buy. But Trudeau figured that was not good enough and the word ‘retirement’ in RRSP was unsexy.

Of course, the kiddos could chunk seven grand a year each into a TFSA, then use those funds (also without tax) for a downpayment after having them grow within the account free of taxation.

But Justin wanted more. Out there. And the FHSA was born. Now Canadians could put $8,000 a year into the tax shelter and deduct the entire contribution from taxable income (like an RRSP). The contributed money could be invested and grow without being hit by the CRA. Then funds could be extracted at any time and used for real estate. And despite getting a tax break for putting money into the FHSA, all withdrawals would be tax-free. Forever. In essence, taxpayers were subsidizing the real estate purchase.

Moreover, the kiddos could sell or flip the house at will and claim the principal residence capital gains tax exemption to retain 100% of any profit realized. Also, if they kept investing in the FHSA, buying no property, the money could be rolled over into an RRSP – whether there was earned room or not – as a $40,000 gift from the rest of us.

Does this sound like something a granular, gritty central bank would offer? Or the son of a lovechild who hung out with the Stones?

Well, the predictable happened.

In short order a million FHSAs were opened. A little less than 5% of these people took out money during the first year to buy real estate. The rest pocketed the tax savings, invested the contributions and watched them grow inside the shelter. About 60% of all the FHSA account-holders were between 25 and 34, and close to two-thirds had a personal income in excess of $60,000.

What did they know?

That this was a mad gift. An aberration. The significant transfer of public tax dollars into the hands of a relatively small cohort of Canadians. And we can see evidence of that in the median contribution made by these folks into their FHSAs – which was the max. Eight grand.

Soon the advice started on how to further game the system.

Combining the FHSA’s max contribution with the RRSP Home Buyer’s Plan (HBP) resulted in a whopping $100,000 tax-free pile to use for a house downpayment. For a couple, it was $200,000 with no tax liability whatsoever at the time of withdrawal.

The FHSA also raided RRSP contributions, of course. Someone with $8,000 to contribute to a shelter would be smarter sticking it in a FHSA, yielding the same tax break as feeding a retirement plan account but giving the opportunity of withdrawing it tax-free. Growth inside each account would be equal, but the growth removed from the FHSA would be taxless while the RRSP withdrawal taxed.

Money sitting inside an existing RRSP can be transferred into a FHSA. The same funds can then be taken out of the real estate shelter account and used to buy an asset, without ever being taxed or facing repayment, as with the HBP. And, as mentioned above, if you buy no property within 15 years the whole shebang can be rolled over into your retirement account, even without having available room.

All this, in a word, is ridiculous.

No wonder the government currently in power has stopped reporting FHSA stats. There are no valid numbers on how many accounts currently exist, how many kiddos have bought houses with the money, the total amount contributed nor the cost to the public treasury of the tax breaks dished out. Plus, when the real estate market awakens again and the buyers start buying, unknown will be the impact on prices of a torrent of tax-advantaged FHSA money gushing forth.

Does any of this sound consistent with prudent fiscal management? Or more like a meth party?

The FHSA death watch is upon us.

About the picture: “A Ziggy photo in case you’re desperate for dog pics,” writes Lloyd. “Here she’s forest-bathing while I’m doing some volunteer work at Heritage Acres in Central Saanich.  Enjoying your work as always (a massive and generous “volunteer project” on your part) as well as the variety of input from your colleagues.  Altogether a remarkable body of work.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/05/15/the-death-watch/