Trudeau Liberals deepen push into housing relief with 2023 Fall Economic Statement

With housing prices still near historic highs in much of Canada, and rents surging to unprecedented levels in some cities, the federal government announced a raft of measures aimed at lowering housing costs.

Unable politically to wait until the 2024 budget, Finance Minister Chrystia Freeland used the Fall Economic Statement (FES) to announce several new measures aimed at incentivizing builders and developers to increase the supply of housing. 

“We want to change the equation for builders to encourage them to build more homes that would not otherwise have reached the construction stage,” Freeland said in a news conference in Ottawa on Nov. 28. “And above all we want to build more homes for Canadians, faster.”

The help cannot come sooner. The average price of a home is still more than $630,000 across the country. Though lower in smaller cities in Ontario, Toronto’s average rental asking price was $1,765 for a purpose-built two-bedroom rental and more than $2,600 for a similarly-sized condo. 

So in response, the Trudeau Liberals are amping up measures to increase housing supply and attempt to bring prices and rents down. But most of the latest measures will take years if not a decade to bear real fruit.

With the offer of and additional $15 billion in loan assistance for new rental housing construction, Canada Mortgage and Housing Corporation (CMHC) is getting back into the practice of actually building housing in a way not seen since the public housing cuts of the 1990s. 

But the terms attached to this money speak to how long it may take to right the ship. The CMHC says the new loans will start flowing only in 2025, and be spread over the following 10 years. 

Why the delay in getting the loans to market? Mainly, the feds can’t afford to do it any sooner. Fresh fiscal projections now show the government running $20 to $40 billion deficits for the next five years.

“These steps are material relative to the size of the sector, but it will of course take time for this additional supply to be built and work to slow rent inflation,” CIBC economists Avery Shenfeld and Katherine Judge write in an analysis of FES released this week. 

Following efforts by British Columbia and Ontario among others, the federal government imposed a one per cent tax on what they call foreign-owned “underused” housing units, last year. Now, after pushback, the tax will no longer apply to a foreign owner who uses property to house their employees

It will also no longer apply to select Canadian trusts, partnerships or corporations that comply with several prescribed measures.

Finally, it will also no longer apply to foreign owners in “certain” areas of the country so long as they or their spouse occupy the unit for at least 28 days per year. This 28 day exemption can only be used on one property per household. 

In addition to all purpose-built rental housing, the FES announced that GST will no longer be charged on new co-op rental housing construction.

Together, the GST removals will cost taxpayers $1.4 billion per year by 2028. 

Also, eligible co-op rental projects can be completed any time in the next thirteen years to qualify for the GST rebate.

The FES announced the federal government will no longer let property owners deduct expenses incurred on properties they offer as short-term rentals on platforms such as AirBnB.

The crackdown is meant to encourage property owners to offer the units as traditional long-term rentals instead.

“We’re going to deny tax advantages to people who don’t follow the rules,” Housing and Infrastructure Minister Sean Fraser said on Nov. 28. 

They’re also offering cities $50 million over three years to increase enforcement measures against short-term rentals. 

But will this increase the supply of rental housing?

It’s been less than 90 days since New York City took even harsher measures against short-term rentals, but The Guardian points out that average rental rates have receded slightly, and the residential vacancy rate reached its highest point in three years. 

1. The feds said in the 2023 FES they’re also expanding opportunities to convert federal land into housing.
2. They’ll also offer migrant workers in the construction trades a priority pathway to permanent residency, as builders often complain they do not have enough labour to fulfill their construction needs.