Finance Committee on Oct. 16th, 2023

[The Chair, Liberal, Peter Fonseca]

The PS is not here. I know the PS was looking into that.

Go ahead, MP Morantz.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Okay. Thank you.

I want to touch on some of the different tax treatments that might be available to incentivize the private sector and home construction.

I remember that back in the 1970s and 1980s, the multi-unit residential building program allowed people investing in real estate to take the capital cost allowance and soft costs against personal and professional income. I noticed that in your submission to the finance committee, you talked about how one thing that could be done, for example, is deferral of the capital gains tax and recapture of the capital cost allowance on the sale of rental housing if it's reinvested in rental housing.

There are other things that could be done, too, but I wonder whether you could comment on the tremendous potential of tax incentivization to help bring a solution to this problem.

[Kevin Lee]

I think that's very important.

In terms of new construction, the GST was our big ask. In terms of incenting the sale of buildings, which....

By the way, one of our recommendations was a tax credit to sell the buildings to the non-profit sector in order to keep them affordable and move them into the non-profit sector, if you were taking that money and reinvesting in new supply. Yes, capital tax deferrals and tax credits would enable people to move supply into the non-profit sector. They can have a huge.... Right now, purpose-built rental....

It's been so hard to pencil out projects for decades, so every tax measure that can make it competitive and enable the market to work is beneficial.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I think Mr. Richardson wanted to comment on this, Mr. Chair, if I still have time.

[The Chair, Liberal, Peter Fonseca]

Yes, go ahead, if you have one quick question.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Go ahead, Mr. Richardson.

[Mark Richardson]

We've been working with the Urban Land Institute's Toronto Affordable Housing Leadership Council, and that's one of the reports we're going to submit next month. One of the things identified in there is accelerated depreciation—reducing the early-year tax burden on rental housing by reducing taxable income in current years in exchange for increased taxable income in future years.

I'm not a tax lawyer, so I can only pass on what's going to be in that recommendation. However, in the same way that the HST helped, this accelerated depreciation might help. We need every tool. We need the Swiss Army knife approach to solve the housing crisis.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Morantz.

Now, for the final two minutes, we have MP Baker.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks, Mr. Chair.

I'll direct my questions to Mark Richardson from HousingNow.

First of all, the Government of Canada recently announced that we were removing the GST on the construction of new rental housing. Can you talk about the impact of that?

[Mark Richardson]

As I was mentioning earlier, for a city of Toronto project of about 200 units at 600 square feet per unit, if the province joins in with you, our calculation works out to about $48,000 per unit being saved through that tax treatment.

There are projects under way right now that aren't going to qualify for that tax treatment because it's only for new projects, not projects already in the pre-build phase. We know there are big projects in Toronto right now that don't pencil out. They will either be cancelled or flip to condo versus being purpose-built rentals, so sliding the date back as much as possible would be appreciated.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Has the province joined in on that?

[Mark Richardson]

It said it was going to, but I don't think it has actually passed the regulations yet. The housing ministry in the Province of Ontario has been busy with other things.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Understood. Hopefully, it will.

Dates aside for a moment, could you speak about the impact of the government's decision to remove the GST on the construction of new rental housing? What is the impact, ultimately, of those cost savings?

[Mark Richardson]

It makes projects more viable. The challenge is that the $48,000 a door that we're now saving, when I talk about the acceleration, would have been more valuable if we had had it in 2016, when the costs and interest rates were lower. Introducing it now, saving that $48,000, really takes a 2023 project back to 2019 numbers on its viability.

It's one of the tools in the Swiss Army knife, but all you're doing is counteracting the increases in interest rates and construction costs. We've set ourselves back a bit, and now we need to consider how we find other tools to improve and incentivize.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I often wonder what we could accomplish if we could go back in time.

[The Chair, Liberal, Peter Fonseca]

We could accomplish a lot.

Thank you, MP Baker. We'll have to think about that.

We want to thank our housing experts, our witnesses, who have come before our committee for this study on housing. Your answers to the many questions will help inform the study. We thank you so much on behalf of committee members, the clerk, the analysts, the interpreters, and everybody else here.

With that, the meeting is adjourned.