Major parties show they recognize the need for housing plans

By Brent Bellamy, Associate + Creative Director 
Originally published in the Winnipeg Free Press

Donald Trump-induced anxiety has overwhelmed Canada’s federal election, but housing affordability has managed to remain a central issue in the campaign. Platforms released by the two frontrunning parties approach Canada’s housing crisis in very different ways.

The Liberal plan’s headline-grabbing announcement is the establishment of a new Crown corporation awkwardly named, Build Canada Homes (BCH). The agency will focus on injecting significant amounts of purpose-built affordable housing into the market. Replacing the current model of providing incentives to private developers, BCH promises to make the federal government itself an affordable housing developer. The plan reimagines a postwar initiative that saw the federal government address housing shortages by constructing small homes across the country based on a catalogue of pre-approved designs. A new Housing Design Catalogue of regionally contextual, modern designs has been reintroduced for the current initiative.

BCH will partner with local builders to manage and develop affordable housing, built largely on public land. It will prioritize innovative housing delivery solutions like prefabrication, issuing guaranteed pre-orders to help build investment confidence in the industry. It will also partner with local not-for-profit developers to create student, seniors, and Indigenous housing, as well as supportive housing under the Housing First initiative.

To attract investment capital to the housing market, the Liberal plan re-introduces a 1970s policy called Multiple Unit Residential Building (MURB) tax incentives. This allows investors in approved rental apartments to deduct depreciation and certain other costs of the building from their personal income taxes, an idea that effectively brought smaller-scale real-estate investors into the market.

The Liberal plan will provide a homeowner incentive by eliminating GST for first-time buyers on new homes worth up to $1 million. They will also enhance programs like the Housing Accelerator Fund, which has become an effective financial carrot, rewarding cities across the country for streamlining housing approvals and removing restrictive zoning barriers to expedite development. Winnipeg is currently halfway through its $122-million agreement, with remaining payments being lost if the program was to be discontinued.

The Liberal plan is a bold, big-picture idea that rethinks how we build housing in Canada, but it comes with significant challenges and potential pitfalls. MURB tax shelters, as an example, were effective at increasing housing construction, but were often risky investments for those not familiar with the nuances of the real estate market.

Adding new layers of bureaucracy that do not traditionally move at the pace of the development industry will be a challenge to overcome. The government as a developer must also be careful not to unfairly compete with private industry. It should seek partnerships with local developers and be nimble enough to respond to the unique needs and conditions of each market, avoiding blanket national solutions. It will also be important that the desire for innovation does not get in the way of housing delivery. Growing the prefabrication industry is an important long-term goal, but it currently does not have the capacity, expertise, or financing models to fulfill aggressive immediate targets for homebuilding.

The Conservative housing platform was largely introduced last year as Bill C-356. The plan does not present any new initiatives to specifically build or incentivize purpose-built affordable housing, relying instead on the idea that increasing supply will reduce demand pressure, and more competition in the seller’s market will eventually result in lower prices. The central idea to increase construction is a developer incentive that removes federal GST from newly built homes valued below $1.3 million. The plan does not offer any new strategies that specifically address the construction or affordability of rental housing. It does propose selling federal land to private developers to build housing on.

While not specifically a housing policy, the proposed Canada First Reinvestment Tax Cut allows individuals and businesses to sell assets and defer capital gains taxes if the proceeds are reinvested into Canadian businesses, including residential construction. This policy could attract new investment capital to the housing industry.

If the Liberal plan provides carrots to influence civic governments, the Conservative plan uses sticks. Identified “high-cost cities” will be required to increase the number of homes constructed each year by 15 per cent (doubling construction every five years). If they miss these targets, federal funding for infrastructure and transit will be withheld as a punishment. A financial bonus will be provided to cities that exceed housing targets, paid for through the cancellation of the Housing Accelerator Fund. Bill C-356 indicated that the bonus would be capped at only $100 million to be shared by all cities.

This strategy appears to overlook the reality that many factors impacting development are outside of a city’s control, including labour markets, interest rates, tariffs, construction costs, vacancy rates, and overall economic conditions.

The plan will also create a mechanism for Canadians to file complaints about NIMBYism or rejected housing proposals in their cities. When complaints are deemed legitimate by currently undefined criteria, federal infrastructure funding will again be withheld.

The “high-cost cities” identified in Bill C-356 were restricted to municipalities around Toronto, Vancouver, and Calgary, so Winnipeg would not be part of these strategies unless this was changed.

The Liberal and Conservative plans both propose spending billions to compensate cities that agree to reduce development fees — charges imposed on residential construction to pay for infrastructure that can significantly drive up the cost of housing. This would unfairly reward cities that impose egregious fees like Toronto and Vancouver, while providing almost nothing to cities that don’t, like Edmonton and Winnipeg. It would seem fairer for the federal government to look at more equitable ways to fund urban infrastructure, like providing a share of the gas tax directly to municipalities.

The Liberal and Conservative plans approach housing affordability in different ways. With residential costs rising in a straight line for two decades, it’s encouraging that all parties have finally recognized the urgency for Canada’s housing crisis to move into the political spotlight.