Issue 1: The Establishment of a Permanent National Housing Roundtable
It’s time for a stronger, smarter and better approach to national housing policy development. We would like to see the establishment of a small roundtable of ten to 15 private-sector policy experts serving the function of vetting new policy, bringing new ideas to the table, and reviewing for unforeseen consequences. This would ensure that any new housing policy has been thoroughly pressure tested before implementation.
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Issue 2: Federal Tax Reform and Policy Review
Over-taxation as well as under-researched and inefficient housing policies are hindering national affordability efforts. A review of these issues is increasingly urgent amidst US trade and tariff challenges. The time for action is now.
Financing Needed for New Housing Supply
- The federal government would like to see close to four million new homes built over the next decade to improve housing affordability for Canadian families. That level of construction will require a substantial investment through some combination of pre-sales, financing from investment funds, and contributions from the federal government. The magnitude of necessary investment is in the trillions of dollars over the next decade.
- One source of capital could come from a deferral of taxes on recaptured Capital Cost Allowance (CCA) and any accrued capital gains if the proceeds of sales are reinvested into a new rental development. Given the amount of capital required, we will also need to source investment from outside of Canada, which means allowing non-residents to purchase pre-sales or new construction.
- Recommendations:
- We recommend allowing non-residents to purchase pre-sale and new construction and implementing a deferral of CCA and any accrued capital gains.
- A review of policies that disincentivize foreign investment would also be a beneficial undertaking.
Remove GST for All Buyers of New Construction for Principal Residence
- Both leading political parties have made removing the GST on the purchase of a new home a centrepiece of their housing strategy:
- Federal Liberal Proposal: The choice to include only first-time homebuyers in the scope of their recommendation limits the effectiveness of the Liberal proposal.
- Federal Conservative Proposal: Expanding the elimination of GST on new housing for both primary and secondary properties may spur additional investment, but at a high fiscal cost. It may also tilt the playing field too much toward investors.
- Recommendations:
- We recommend eliminating the GST for all new homebuyers of principal residences, up to a threshold that will ensure demand is focused upon missing-middle housing and density.
- This threshold should be set regionally, recognizing the large differences in home prices across Canada.
- To prevent costs from jumping once the regional price threshold is surpassed, we recommend establishing a cost-defined reduction of the GST owing.
- This GST elimination, in conjunction with the available 30-year amortization for mortgage qualification, will provide a meaningful boost to demand for new units helping to spur further new home construction.
Federal Funding to Lower Development Cost Charges and Fund Municipal Infrastructure
- Rising development cost charges (DCCs) have become a significant barrier for new construction in many Canadian cities. While we recognize both the need to fund infrastructure and the difficulty in doing so within a limited municipal budget, the costs being passed on to new development are detrimental to the economics of many projects and will only result in cancelled or delayed development.
- Recommendations:
- We propose that the federal government expand and reorient its Housing Accelerator Fund (HAF) to primarily provide financing for municipal infrastructure in communities that have shown a willingness to expand housing supply.
- While the creation of the HAF has been a step forward for municipalities, it was done without adequate structure to help municipalities get the most out of the funds they receive. This program could be more efficiently utilized with a primary focus on DCCs and amenity cost charges (ACCs).
- Additionally, policymakers should be encouraged to provide flexibility on the timing of DCC payments, allowing them to be collected at the end of a project rather than up front to ease the financial constraints on housing projects. Accelerator funding could also be used in these instances to carry related cost charges.
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