At a housing announcement in Hamilton this summer, Prime Minister Justin Trudeau said that while housing is not primarily a federal responsibility, it is “something that we can and must help with.”
Given that the federal government’s immigration policy is set to increase Canada’s population by another 1.5 million people by 2025, thus dramatically increasing housing demand, the government should indeed use more of the specific powers at its disposal to help meet that demand.
The federal government took a very positive first step in September to remove the GST from new purpose-built rental housing construction. Purpose-built rentals represent a vital segment of our housing stock. Unfortunately, the region’s stock of purpose-built rental housing is aging, and due to market conditions, new purpose-built rental supply is coming to market at much lower levels than other forms of housing such as market condominiums.
Almost 90 per cent of the region’s purpose-built rentals were built more than 40 years ago, when the tax system and market conditions were more favourable for purpose-built rentals. This huge tax policy announcement from the federal government will help spur more investment and new construction of desperately needed purpose-built rental housing.
Another action the federal government can take is to provide municipalities with financial assistance to build more infrastructure that supports housing. New homes can only be built when roads, water management systems, and power networks are in place. We cannot simply rely on the development charges levied on new homes to pay for the infrastructure communities need.
Continually adding costs like these to the prices of new homes worsens the affordability challenges that Canadians face.
This is where programs like the federal Housing Accelerator Fund can support building more infrastructure, pressure municipalities to fix outdated zoning by-laws to allow for more new housing, and ensure municipalities do not keep raising taxes like development charges on new housing. The federal government should take further steps to reduce that tax burden on new housing.
The federal government should also keep its decades-old promise to index the thresholds for the GST/HST new housing rebate. In 1991, when the GST was originally introduced on new homes, the average cost of a new home in southern Ontario was $250,000; today, it is closer to $1.2 million. Yet the rebate thresholds remain the same, with the federal government collecting nearly $60,000 per housing unit in tax revenue.
The time has come to give some of that money back to the new home buyer to help with housing affordability.
Welcoming 1.5 million new Canadians in the next few years will help make our economy more competitive and our society more dynamic. All levels of government will need to plan for how they are going to meet the accompanying increase in housing demand. As the driver of immigration policy, the federal government must do its share to provide housing for newcomers and address housing supply and affordability for all Canadians.
Mike Collins-Williams is a Registered Professional Planner and is the CEO of the West End Home Builders’ Association (WE HBA), the voice of the home building, land development and professional renovation industry. For the latest industry news visit www.westendhba.ca
