It’s no surprise that Canada’s insufficient rental housing supply featured prominently in the federal government’s fall economic update, delivered November 21st. Introducing a slew of new measures to help restore housing affordability, the federal government’s plan includes getting more shovels in the ground by addressing the skilled labour shortage, introducing billions of dollars in financing toward the creation of more purpose-built rental homes, and cracking down on short-term rental operations.
“Our economic plan is about building a strong economy that works for everyone, and this Fall Economic Statement is the next phase of our plan,” said Chrystia Freeland, Deputy Prime Minister and Minister of Finance. “With a focus on supporting the middle class and building more homes, faster, we are taking action on the priorities that matter most to Canadians today—and we will continue doing everything we can to deliver for Canadians from coast to coast to coast.”
So far, response from the sector has been largely favourable with advocates calling the new measures “promising”—or at the very least, a step in the right direction. Referring to the housing crisis as the worst in generations, Richard Lyall, president of the Residential Construction Council of Ontario (RESCON), put it this way: “Billion-dollar fixes are being proposed, but the housing supply crisis and affordability issue is a trillion-dollar problem, as noted by the CMHC. We are encouraged that housing is a main focus of the feds but there are still many impediments that were not addressed such as the enormous infrastructure funding gap faced by municipalities that impedes new home construction. We need a Marshall plan-styled strategy with respect to the chronic housing supply shortfall.”
Ontario REALTORS were more enthusiastic about the proposed measures, specifically those intended to jumpstart housing construction.
“We are pleased to see several pro-housing, pro-supply measures on the table today, including a commitment of $15-billion in low-cost loans for new purpose-built rentals and $1-billion dedicated to new non-profit housing,” said OREA CEO Tim Hudak. “As interest rates have increased over the past year, financing has become increasingly expensive – so programs such as this can help get rental housing construction underway. The Government of Canada’s housing-focused Fall Economic Statement is a clear indication the federal government is taking this issue seriously.”
Meanwhile, Toronto Mayor Olivia Chow expressed disappointment in the increased housing investments, referring to them as ‘not ambitious enough.’
“Toronto urgently needs more money to alleviate the dire housing crisis,” she told reporters after the update. “There’s a plan there, it’s promising—but the people need more, faster.”
Short-term rental deterrents
One way the government hopes to bring more rental housing to market quickly is by cracking down on short-term rental operators. It’s estimated that Montréal, Toronto, and Vancouver alone lost 18,900 homes to short-term rental use in 2020—homes the government says could have been used for permanent rental housing.
To harness them for long-term usage, short-term rental operators in Canada will soon be denied income tax deductions for expenses incurred to earn short-term rental income, including interest expenses in provinces and municipalities that have prohibited short-term rentals. The 2023 Fall Economic Statement is also proposing $50 million over three years to support municipal enforcement of restrictions on short-term rentals.
“We know that short-term rentals through sites like Airbnb and VRBO mean fewer homes for Canadians to rent and live in full time, especially in urban and populated areas of our country,” Chrystia Freeland said on October 17. “That is why our government is actively examining what options and tools exist at the federal level, to ensure more short-term rentals are made available as long term-rentals, as permanent homes, for Canadians to live in.”
This comes a month after the B.C. government introduced measures of its own to limit short-term rental operations, including a rule that operators in the province must live in the same house or suite as the rental space. B.C. will also be providing municipalities with resources to penalize operators that don’t operate according to municipal bylaws.
Low-interest financing
On the construction front, Canada’s housing supply has not been keeping up with the growth of its communities, and rental housing in particular is short of where it should be. The government hopes to spur new development by giving builders access to low-cost financing offered through the new Apartment Construction Loan Program, previously known as the Rental Construction Financing Initiative. Since 2017, the program has committed over $17 billion in loans to support the creation of more than 46,000 new rental homes. Now, an additional $15 billion in funding will be used to support an additional 30,000 rental homes.
According to the feds, “the new Apartment Construction Loan Program will be available to provinces and territories that are ready to deliver thousands of new homes for the middle class, along with the community supports, such as affordable early learning and child care, that families depend on to get ahead.”
Speeding up approvals, reducing red tape
While it was noted that CMHC requires some processing time to ensure investments meet the right policy criteria and risk level, the government indicates that efforts will be made to get things done faster. As per the fall statement, future housing developers can look forward to improvements in the approval stage, with CMHC vowing to “streamline and simplify requirements and application processes and fast-track shovel-ready projects and applications from trusted partners.”
Overall, the government concedes that the road to increasing housing supply requires the removal of zoning, financial, and regulatory barriers that disincentivize construction, particularly for rental and affordable housing.
“Outdated and unnecessary zoning restrictions delay development and increase costs—and in too many cities across the country, they prevent housing from being built at all,” the Fall Economic Statement concludes. “The federal government is working with governments across Canada to help them cut red tape, speed up permitting approvals, lift zoning restrictions, and build more homes, faster.”
For the full host of measures, including details on previously announced initiatives such as the Enhanced GST Rental Rebate program, visit: 2023 Fall Economic Statement (canada.ca)
