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Federal housing initiatives lacking: A call for clearer, bolder steps ahead of election

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As political parties jockey for position in advance of the next federal election (taking place in October 2025, at the latest), the housing supply in Canada continues to be a major topic in the public discourse.

Since the last election, the Liberal Government launched several major housing-related initiatives. These include a $4 billion Housing Accelerator Fund (HAF), and more recently a $6 billion Housing Infrastructure Fund (HIF), intended, among other goals, to provide Provinces and Municipalities with alternate sources of funding to the infrastructure-related charges often imposed on housing developments.

And, the recently announced 2024 federal budget contained a slew of housing-related commitments and allocations, including plans to explore utilizing government-owned land for housing development. 

 

Fund distributions require long, labourious processes — we need clearer, bolder steps

 

In the shadow of a forthcoming election and the climate of generalized discussions about a housing crisis, the federal government clearly feels the need to be seen as “doing something.”  It’s important to remember, though, that the legal mechanics of housing delivery are typically a municipal prerogative: development, building, electrical, plumbing, occupancy and other permits are all issued by local governments. 

Generally, the federal government isn’t directly involved in approving new housing. Accordingly, the funds mentioned above mainly operate to incentivize certain policy directions at the municipal or provincial level (i.e. allowing multiplex residential zoning, as of right).

 

Distributions from these funds require applications, negotiations and bureaucratic interplay between different levels of government — inherently non-alacritous and labourious processes which may explain why, for example, the HAF didn’t make its first funding announcement for almost a year and a half. Veteran housing analyst Steve Pomeroy estimates the HAF will have a limited impact on the immediate housing supply.

Since the federal government clearly has both an impetus and a desire to facilitate an increase in the housing supply, perhaps it’s time to consider clearer and bolder steps.

 

A federal CAC subsidy

 

Municipalities collect Community Amenity Contributions (CACs, sometimes also known by other names, like Density Bonus payments), the monetary or “in-kind” contributions developers make for increased density on a development site. For example, CACs would come into play when a developer wants to build a 12-storey building with a commercial and residential component, in an area currently zoned for four storeys of residential. 

Ostensibly, municipalities put CACs towards the community infrastructure required by increased residential density: parks, community centres, etc. Instead of adding costs to the housing supply, the federal government could step in and fund the CAC contribution.

A missing-middle project on the west side of Vancouver entails a CAC of some $70,000+ per unit (over and above the Development Cost Levies (DCLs) already charged for infrastructure upgrades). An average condominium unit in Vancouver’s Broadway Plan area would carry a CAC of somewhere in the range of $80,000 per unit. In recent years, municipalities like Toronto and Vancouver collected hundreds of millions in cash and “in-kind” CACs.

 

Under a federal CAC subsidy program, municipalities would:

 

  1. reference the new homes approved and delivered in their market,
  2. outline the CACs they would have charged and what they would have spent them on (e.g. a new community centre) and
  3. ask the federal government to provide the funding.

This proposed framework is an extension of an existing rationale within the HIF process, which ties funding to a three-year freeze in development charges. Granted, a federal CAC subsidy would entail administrative oversight, but at least it would also have a tangible impact on affordability by removing the CAC cost layer from housing supply.

 

Eliminate the GST on all forms of housing

 

The government took a step in the right direction with the removal of GST on rental developments. However, bearing in mind that according to the CMHC, we have a chronic undersupply of housing more generally, the federal government should consider eliminating GST on all forms of housing.

Many fundamental goods and services are already GST-exempt, including certain food items, medical and dental care and basic financial services. Given that shelter is a fundamental need, why shouldn’t it also be exempt from GST?

Whereas at least CACs and DCLs contribute to the civil and community infrastructure that supports housing density, GST merely increases the cost of shelter for the end user. For a new unit of housing valued at $700,000 (approximately the current national average housing price according to CREA), the GST would be around $35,000.

Granted, there are some GST rebates for lower-priced homes, but these are only partial. Eliminating GST on shelter requires no bureaucratic administration and will directly and simply reduce the cost basis of the housing supply. 

 

Funding CAC contributions and removing GST present clear and present opportunities for the federal government to “move the needle” on housing affordability. Sometimes, simpler is better.


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