Three actions the federal government could take to support housing
September 06, 2023
This summer, at a housing announcement in Hamilton, Prime Minister Justin Trudeau said that while housing is not primarily a federal responsibility, it is “something that we can and must help with.” Given that the federal government’s immigration policy is set to increase Canada’s population by 1.5 million people by 2025, thus dramatically increasing housing demand, the government should indeed use the specific powers at its disposal to help meet that demand.
Financially assist municipalities
One action the government can take is to financially assist municipalities to build more infrastructure that supports housing. New homes can only be built when roads, water management systems and power networks are in place. We cannot simply rely on the development charges levied on new homes to pay for the infrastructure communities need. Continually adding costs such as these to the prices of new homes contributes to the affordability challenges that Canadians face.
Index GST/HST rebate thresholds
The federal government should also keep its decades-old promise to index the thresholds for the GST/HST new housing rebate. In 1991, when the GST was originally introduced on new homes, the average cost of a new home in the GTA was $250,000; today, it is $1.2 million. Yet the rebate thresholds remain the same, with the federal government collecting nearly $60,000 per housing unit in tax revenue. The time has come to give some of that money back to the new-home buyer to help with housing affordability.
Defer the HST on rentals
Finally, the government could defer the collection of HST on purpose-built rental housing. Deferral would preserve federal revenue while still helping to accelerate the building of new supply in this very important housing class. There is precedent for this: Federal tax policy in the 1970s resulted in a golden age of purpose-built rental building in Canada.
Welcoming 1.5 million new Canadians in the next few years will help make our economy more competitive and our society more dynamic. But all levels of government will need to plan for how they are going to meet the accompanying increase in housing demand. As the driver of immigration policy, the federal government must do its share to provide housing for newcomers and address housing supply and affordability for all Canadians.