Government tax break on construction of rentals 'positive step' says MP

Housing affordability ideas

This week marks the beginning of the fall sitting of the House of Commons.

However, the discussions in Ottawa differ significantly from what I hear from (constituents) in our riding of Central Okanagan-Similkameen-Nicola.

The most common concerns raised in the riding relate to rising interest rates and inflation. That is due to the recent announcement by Statistics Canada that Canada's inflation rate for August rose by 4% year over year, following a 3.3% increase in July.

Many are now experiencing severe anxiety as they fear further interest rate increases from the Bank of Canada. It has become a common concern to hear from those struggling to cover their bills at the end of each month.
In response to these concerns, the prime minister called a meeting with representatives from Canada's five largest grocery store chains. He requested grocery prices be stabilized by Thanksgiving (Oct. 9) or the stores would be subject to higher taxes.

However, experts—including stakeholders within the grocery industry—have pointed out that adding more costs to grocery stores through increased taxation will increase prices rather than decrease them. Some recent expert reports suggest grocery prices will likely stabilize independently in the coming months without government intervention. Those reports also highlight increased costs from farmers and grocery producers, such as higher transport costs, as a significant cause of grocery store price increases.

I'm not sure if the prime minister was sincere in his threat, as many have suggested this action was more for show to give the impression of taking action without actually doing so.

In a separate announcement, the prime minister also committed to removing the Goods and Services Tax (GST) on new rental apartment construction. The removal of GST on rentals is not new in Canadian politics. Pierre Poilievre, the Conservative leader, has long called for a new approach.

While reaction to this announcement was mixed, from my point of view, it is a positive step as this issue is boiling over with very real impacts for people.

Given that higher interest rates have halted many large apartment projects, this may encourage some of those purpose-built rentals on the financial margins to proceed. New rental housing stock will be welcome, especially in the fast-growing municipalities of our area, where rents are highest and vacancies lowest. New rentals will also provide more choice and competition, particularly for new workers, which is crucial for employers trying to attract and retain workers.

However, there is no guarantee newly constructed rental housing will be offered at rates below the current market rates. Additionally, it is uncertain if these projects on the margins will be sufficient in quantity to slow down rapidly rising rental rates or increase local vacancy rates.

Poilievre has introduced proposed legislation, known as "The Build Homes, Not Bureaucracy Act," to address this issue and others. It allows for a GST rebate of up to 100%, depending on whether the rent offered is below the local market average for five years and (the project) must be built within three years to qualify. That is to ensure developers are incentivized to serve the immediate public need for more affordable rentals.

The government’s new policy is to take 100% (of the) GST off all apartment rentals, meaning developers of luxury apartments, due to the higher cost per unit, will receive a higher rebate compared to the developer who creates more affordably priced apartments that are desperately needed. Unlike Polievre’s plan, it only applies to apartment purpose-built as rentals and not to smaller, affordable rentals offerings such as co-ops, duplexes, fourplexes and the like.

In conclusion, while removing GST on rental construction on apartment buildings is a positive step, it is not a silver bullet and I recommend the government look across the isle for more ideas about how to build more affordable rentals.

My question this week is:

Do you think that removing GST on rental construction, as the government has done, will be sufficient to increase rental affordability? Why or why not?

Please feel free to contact me at [email protected] or call toll-free at 1-800-665-8711.

Dan Albas is the Conservative MP for Central Okanagan-Similkameen-Nicola.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

Dan Albas is the Member of Parliament for the riding of Central Okanagan-Similkameen-Nicola and the co-chair of the Standing Joint Committee for the Scrutiny of Regulations.

Before entering public life, Dan was the owner of Kick City Martial Arts, responsible for training hundreds of men, women and youth to bring out their best.

Dan  is consistently recognized as one of Canada’s top 10 most active Members of Parliament on Twitter (@danalbas) and also continues to write a weekly column published in many local newspapers and on this website.

Dan welcomes comments, questions and concerns from citizens and is often available to speak to groups and organizations on matters of federal concern. 

He can be reached at [email protected] or call toll free at 1-800-665-8711.

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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