Under the first-time home buyer incentive (“FTHBI”) program, first-time homebuyers received a payment from the federal government (an “Incentive”) towards 5% or 10% of the purchase price of a primary residence, with the homebuyer being required to repay the Incentive plus a share of the appreciation in the home value 25 years after the purchase date or on a sale of the home, if earlier (and with the government sharing in any loss). This arrangement was styled as a “shared equity mortgage.” Effective June 1, 2022, the program was amended so that the Government’s shared equity gain or loss amount was capped at 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment. Given that the gain cap applied retroactively from the commencement of the program, reimbursements were made to homebuyers who had made a repayment of their shared equity mortgage in a prior year to the extent the 8% annual cap had been exceeded.
Regarding whether the reimbursement payments were income to the homeowners, CRA stated:
[W]e understand that amounts received by borrowers represent a reimbursement of a portion of the shared equity amount that was paid to the Government in a prior year (i.e., upon repayment of the borrower’s shared equity mortgage). Essentially, the amount received is a reimbursement of a borrowing cost incurred with respect to the purchase of the homebuyer’s personal residence. Thus, it is our view that the amount will not be included in the borrower’s income … .
In its summary, CRA noted that the reimbursements also would not be regarded as adjustments to the proceeds of disposition that had been received on sales of the residences.