The federal government’s decision to scrap GST on purpose-built rentals is expected to add tens of thousands of units to the property market. But it’s just the first necessary step if Canada is serious about closing the housing gap.
Prime Minister Justin Trudeau announced this week the move to waive the federal portion of the HST for rental housing construction.
Mike Moffatt, senior director of policy and innovation at the Smart Prosperity Institute in Ottawa, is still trying to determine precisely how eliminating the tax will affect supply. But he did the math after the federal announcement and says some rough estimates are encouraging.
“I think this could increase supply by 200,000 to 300,000 by the end of 2030, but it was a very rough estimate,” he told Breaking:.
This is encouraging, but industry players say governments at all levels must do more – much more – to build enough housing in this country. The Canada Mortgage and Housing Corporation (CMHC) says 3.5 million new homes are needed by the end of 2030.
That would require Canada to build at a faster pace than this country has seen in decades. But there are some simple steps that can help you move forward.
Speed up the approval process
“I always see it in three categories: you need approvals, you need people to build these things and you need a way to finance them,” said Ana Bailão, former Toronto deputy mayor and housing advocate.
“Right now, we are having problems in all three sectors,” he said.
Bailão says all levels of government must step up and make changes. But with a simple gesture, he says, cities can dramatically speed up the approval process.
The City of Toronto has begun making some changes to its zoning regulations, but people like Bailão are pushing the city to go much further in its next phase, which is still being considered.
The concept she proposes is called “upward zoning.” It would match local zoning with the city’s plan to increase density in specific areas.
“Right now we have to go through a rezoning process, which takes at least a year, if not more, although we have agreed that we want density on those streets,” Bailão said.
And that doesn’t just mean new condo towers. Density comes in all shapes and sizes.
In Vancouver, radical changes have just been approved to allow and encourage the construction of multiplex cinemas.
“Most of Vancouver’s land is zoned residential,” said Steve Saretsky, a real estate broker and researcher in the Lower Mainland. Until this week, he says, the only thing that could be built without a zoning change was a single-family home or a duplex.
But now, the city will allow multiplexes of up to six units on residential lots. Developers can build up to eight units if they are purpose-built rentals and one of the units is occupied by the registered owner of the site.
“Multiplexes are definitely needed,” Saretsky said. “There will be much more demand from families for multiplex units than for a 40-story skyscraper.”
More construction workers needed
But zoning can only encourage so much. In order to build things, Canadian developers need labor.
When he was sworn in as the new federal housing minister in July, Sean Fraser, who previously served as immigration minister, drew a straight line between the housing crisis and the shortage of skilled workers.
“When I spoke to developers in my capacity as Immigration Minister before today, one of the main obstacles to completing the projects they want to do is having access to the workforce to build the homes they need,” he said. .
Jennifer Keesmaat, former chief planner for the city of Toronto, explains how the federal government’s decision to eliminate the GST on purpose-built rentals can help alleviate the housing shortage across the country by encouraging developers to build rental units quickly.
There are tens of thousands of unfilled construction jobs across Canada, according to the Laborers’ International Union of North America.
Economists have long argued that the federal government needs to adjust its immigration goals to attract more electricians and plumbers.
Even if the regulatory process is addressed and developers have the right balance of workers, one developer says new units simply won’t be built if the money doesn’t add up.
Lower interest rates for financing
Jennifer Keesmaat, a partner at Markee Developments and former head of planning in Toronto, is trying to build 10,000 new units over the next 10 years. But she says her business faces obstacles at every turn.
Keesmaat says rising interest rates have caused many development projects to lose their viability. She says removing the GST will help get some back up and running and speeding up the approval process will help others.
Markee is developing a 23-hectare site that will include 1,500 units and 12 buildings. But Keesmaat says it took him a year to get a hearing after a neighbor filed a complaint about the zoning process. That complaint was eventually withdrawn, but in the meantime, interest rates had increased 10-fold.
CMHC has a funding program called Rental Construction Financing Initiative (RCFI), which aims to encourage developers to build more affordable rental accommodation.
“The RCFI no longer works because the interest rates are too high,” Keesmaat said. “The government could move very quickly to reduce the rate of borrowing through RCFI for new construction projects.” She says that would make some development projects viable again.
None of these proposals are new and politicians at all levels have heard them for years. In the case of the federal decision to eliminate the GST, the idea has been around for more than a decade.
But Bailão, a housing advocate in Toronto, says something has changed in recent months.
“There has been a big change and I think it is because people feel [the housing crisis],” she said.
The housing crisis has reached a new level and almost everyone knows someone who is struggling to find an affordable place to live, he says. This, in turn, has put pressure on politicians to take action.
The key, says Bailão, is to make that pressure stick, so the removal of the GST is just the beginning of broader changes to meaningfully address the crisis.
