Canada’s new housing plan: a balanced approach that will inevitably take time to produce results

Q: In the federal budget there was a lot of talk about the government’s new housing plan. What does it mean for me as a tenant in Ottawa? I can manage the rent of the apartment I live in now, but when I see the ads for new apartments I choke. If I ever have to move, I will not be able to afford anything decent to live in. Will the new plan help me?

A: There is no doubt that the rent for most new apartments is hundreds of dollars higher than the rent for old apartments, even in similar locations. That was almost always the case, but the difference has become more over time. Government fees for new construction have risen, and approval delays have become longer and longer. At the same time, rental demand rose due to increased immigration into Canada and Ottawa.

The new housing plan can be found by searching “Infrastructure Canada” and “housing plan.” The plan addresses many of the issues making housing so costly today.

The plan notes that several months ago the government removed the GST from rental housing (for a seven-year period). What is new is the increase in the Capital Cost Allowance from four per cent to 10 per cent.

That reduces the tax that rental owners have to pay when they actually earn income on their investment, which usually takes several years after a building is first rented.

The plan notes that Canada needs to speed up municipal housing approvals. (Developers have long been complaining about that problem.) The plan states that “in 2020, Canada ranked 37 out of 38 for municipal approval process timeline among [advanced economies]. Canada is three times slower than the United States.”

To fix this, the plan will work with provinces and municipalities to improve their zoning and permitting processes, and to ensure the needed infrastructure is in place.

Another key area in the plan is steps to make land more available for housing development. That is to include surplus federal land — including post office sites — and working with the provinces and cities to free up land they or their agencies own.

You are right to wonder whether the various measures will have a noticeable effect on average tenants. The effect will take years. But the sooner we start, the sooner the results will occur. For the best results as soon as possible, government policy needs to encourage supply generally and to encourage affordable supply, both through construction and acquisition. The plan seems to do those things, although the Canadian Alliance

to End Homelessness and others would also like to see more support for affordability through expanded rent subsidies, which would help people in need much more quickly.

The results will depend on other factors and other policy moves. For example, besides regular immigration, pressure on the rental market comes from inflows of non-permanent residents and foreign students. The government is already taking steps to manage those inflows. And those inflows bring benefits to Canada as well as the pressures, just as the various other inflows of employable people do. In managing all the inflows, the trick for government is to find the “Goldilocks point”: not too much, not too little.