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Canada's housing industry is thrilled with the government's new budget, which provides up to $7.8 billion in tax relief and funding for everything from home renovations to housing for low-income seniors. From First Nations housing to first-time buyers' incentives, there's something for almost everyone.

The Conservative government came through on its election promise to help first-time buyers with closing costs such as legal fees and land transfer taxes. A tax credit worth up to $750 will be made available for first-time buyers, as well as existing homeowners who buy a more accessible or functional home and qualify for a Disability Tax Credit.

The government has also increased the amount that first-time buyers can withdraw from their Registered Retirement Savings Plan to buy a home, from $20,000 to $25,000. The popular Home Buyers' Plan was introduced in 1992 but the amount that could be withdrawn tax-free had not changed since then. The Canadian Real Estate Association (CREA) says in a news release that the plan "has not had the same impact and relevance it did 16 years ago, when the original $20,000 limit represented 13.3 per cent of the average home price, versus about 6.5 per cent in 2008."

Now two first-time buyers purchasing a home together, such as a married or common-law couple, will be able to withdraw up to $50,000 from their RRSPs to purchase a home.

To stimulate the residential construction industry, there's a new 15 per cent income tax credit for home renovation work performed between January 27, 2008 and February 1, 2010. The credit applies to expenditures exceeding $1,000 but not more than $10,000, and provides up to $1,350 in tax savings.

This credit is "family based" – a family is considered to be an individual and their spouse or common-law partner, who can share the credit.

Routine repairs or maintenance such as lawn fertilization, cleaning and snow removal are not eligible for the program. But the credit can be used for such things as renovating a kitchen or bathroom, finishing a basement or building a deck, and it can be used for houses, cottages or condominiums.

The budget provides this example of how the credit could work: "Sally and Ed … decide to replace their windows and improve the insulation in their home in 2009, incurring $10,000 in expenditures. After taking account of the $1,000 minimum threshold, a 15 per cent credit will be available on $9,000 in eligible expenditures, providing tax relief of $1,350." The government expects this program will cost $500 million in 2008-09 and $2.5 billion in 2009-10.

"The use of tax credits will make the program of interest to many Canadians who own their home," says CREA president Cal Lindberg. "But the success will be tied in part to the availability of savings or credit, since the expense has to be paid before the tax credit is issued."

The budget also builds on the existing ecoENERGY Retrofit program, which provides property owners grants of up to $5,000 to offset the cost of making energy-efficiency improvements, such as upgrading insulation or installing a new furnace. Homeowners will be able to take advantage of both this program and the new Home Renovation Tax Credit for eligible work.

Social housing is getting a huge boost in the budget. A one-time investment of $1 billion over two years has been pledged for renovations and energy retrofits for up to 20,000 social housing units, but it must be on a 50-50 cost-shared basis with the provinces.

The Conservatives have promised $400 million over two years for housing for low-income seniors, and $75 million over two years for the construction of housing for those with disabilities – also to be cost-shared with the provinces. Another $400 has been pledged to support on-reserve First Nations social housing projects, and there is also money for social housing in The Yukon, the Northwest Territories and Nunavut.

The government is providing up to $2 billion over two years in low-cost loans to municipalities to invest in infrastructure projects such as sewers and waterlines. This money can be used to fund their contribution to cost-shared federal infrastructure programs.

Michael Atkinson, president of the Canadian Construction Association, says, "Our industry is pleased the government recognized that the best and quickest way to get Canadians back to work is through investments in infrastructure – every billion dollars invested means more than 11,500 jobs."

The Chartered Accountants of Canada gave the government a "B-plus" rating on the budget, and were particularly pleased with the Home Renovation Tax Credit and other tax cuts that were announced. But institute president Kevin Dancey also offered a note of caution that the incentives can't last forever.

"There is uneasiness any time a government turns to deficit financing but these are extraordinary times," he says. "Driving down debt levels is like dieting. It is much easier to put the weight on than it is to take it off. For government, it is much easier to spend than it is to reduce the debt load. It will be important for the government to get back on its diet with a focus on debt reduction once times improve."

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