COVID-19 related investment announced in fall economic statement

COVID-19 related investment unveiled

Canadian government plots to exploit housebound build-up of household savings
Wednesday, December 2, 2020

The commercial real estate, facilities management and construction/retrofit sectors appear poised to capture a share of pending COVID-19 related investment announced earlier this week in the Canadian government’s fall economic statement. Finance Minister Chrystia Freeland characterized the new and continued relief measures for 2021 and beyond as a down payment on a future $70 to $100 billion spending plan.

She pledged the equivalent of three to four per cent of GDP will be allocated to range of green and social well-being investments with job creation potential once health-related COVID-19 concerns subside. That’s to be scoped to a three-year period unlikely to begin until after next year. More details are promised in the 2021 federal budget.

In the interim, Freeland rolled out funding for a package of economic jumpstart measures deemed safe to implement now. She also confirmed continuation of the Canada Emergency Rent Subsidy at current funding levels for the period from December 20, 2020 to March 13, 2021, and a higher maximum ceiling for the Canada Emergency Wage Subsidy during the same period.

“We will support Canadians and Canadian businesses in a way that is targeted and effective,” Freeland said. “We will ensure the Canadian economy that emerges from this pandemic is greener, more inclusive, more innovative and more competitive than the one that preceded it.”

Grants hold promise to trigger additional spending

Perhaps most significantly for green building and energy retrofit enterprises, $2.6 billion over seven years is promised for residential energy efficiency upgrades, and for recruitment and training of energy auditors to help homeowners and landlords find and capture energy savings. It’s envisioned the funds will underwrite as many as a million free home energy audits and provide 700,000 grants of up to $5,000 for energy-efficient home improvements.

An additional low-cost loan fund is planned. Further details are pending, but grants for qualified recipients will be retroactive to December 1, 2020.

“The government also recognizes that homeowners and landlords need to be able to access simple and affordable financing to make deeper home energy retrofits,” the financial statement notes. “Over the coming months the government will outline details of a low-cost loan program that integrates and builds on available energy audits and grants, and which can be easily accessed by Canadians.”

That seems to align with the government’s stated strategy to leverage pent-up household savings. The economic statement observes that many “household balance sheets are now in a better place than would normally be the case” due to the combination of COVID-19 related financial supports and reduced spending opportunities linked to public health restrictions.

“This positions households to be a central force within our economic recovery,” it reasons. “These savings are a preloaded stimulus Canadians will be able to deploy once the virus is vanquished and the economy fully reopens.”

Up to $122 million of the seven-year program budget is slated to be allocated ahead of the 2021-2022 budget. Nearly $300 million has been earmarked for next year, but the bulk of the spending — more than $1.6 billion — is scheduled for budget cycles in the 2023-2025 period.

Prompts for households, developers and institutional investors

Expanded eligibility for the First-time Home Buyer Incentive, which subsidizes borrowing costs for the purchase of first homes, also seems designed to tap into individuals’ and households’ accumulated savings. New rules will come into effect in Toronto, Vancouver and Victoria in the spring of 2021, lifting the annual income threshold to qualify for the incentive to $150,000 (from the current $120,000) in those three markets.

Eligible applicants can now receive loan cost assistance for the purchase of homes worth up to 4.5 times their household income versus the current cap at four times annual earnings. That adjusts the maximum house price the program will cover from $505,000 to $722,000 in the three cities.

There is also an investment prompt for rental housing developers through an extra $458 million over seven years for Canada Mortgage and Housing Corporation’s (CMHC) low-interest loan fund known as the Rental Construction Financing Initiative. That’s projected to be leveraged into an additional $12 billion of lending capacity that could underwrite 28,500 units of new rental housing. The loan fund’s current lending capacity is estimated at $13.75 billion.

Beginning in 2021-22, more funds will be available to support construction of charging and fueling stations for zero-emission vehicles. The promised $150 million over three years augments an existing fund, with an initial $20 million to be added next year.

As was recently announced with the tabling of the proposed Canadian Net-Zero Emissions Accountability Act, the Finance Minister will be reporting annually on measures taken to manage financial risks and opportunities related to climate change. The financial statement commits $7.3 million over three years to establish and support a public-private Sustainable Finance Action Council, which will be tasked with developing investment standards and disclosure protocol related to climate change, as well as offering guidance on data required to support investment decisions.

Health-related investments in public facilities

Among health-related expenditures to commence during the next 12 months, $150 million over three years has been earmarked for ventilation upgrades in public buildings. It’s to be dispersed through two existing programs for resilient infrastructure and safe school facilities, with $30 million slated to be delivered ahead of the 2021-22 budget year.

“This will help provincial, territorial, municipal and local governments and Indigenous communities fund projects that increase air quality and circulation, such as upgrades or conversions of heating, ventilation and air conditioning systems,” the economic statement declares.

In addition, a nearly $300 million top-up of the federal fund for ameliorating homelessness will be specifically applied to mitigate the risk of outbreaks in shelters — described in the economic statement as steps “to enable physical distancing, enhanced cleaning and other emergency health and safety measures”. That’s all to be allocated in 2021-22.

Turning to chronic health conditions, the economic statement commits $500 million in capital funds to build mercury poisoning treatment centres to serve the Asubpeeschoseewagong and Wabaseemoong First Nations. Their territories continue to be afflicted due to externally instigated dumping and environmental degradation that first began in the 1960s.

“Residents experience higher rates of chronic health problems related to mercury exposure. Community members are often required to travel to urban centres for extended stays to receive specialized treatment or access long-term care,” the economic statement acknowledges. “These centres will offer specialized care for residents to address their unique health care needs, as well as supported living for those who require it.”

The $500 million capital outlay also comes with ongoing annual operating support of $300,000.

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