The Minister of Finance, Chrystia Freeland, tabled Bill C-56 in the House on Thursday, which aims to achieve the elimination of the GST on the construction of new housing intended for rental.
The measure, which will take the form of a refund of the GST collected on material and labor costs, will apply to future rental properties, regardless of their market value and the amount of rent.
Minister Freeland justifies this choice of not sticking to apartments offered at affordable prices by maintaining that the “main problem” of the housing crisis is the lack of available units.
“It’s a math question,” she said. She argued that other, more targeted measures have been taken by Justin Trudeau’s government since he took power in 2015.
“We will continue to do that at the same time as having general measures which will use all the powers and all the capital of the private sector to build more housing,” continued the Deputy Prime Minister.
However, the government’s decision arouses indignation from the New Democratic Party (NDP), which has an agreement with the Liberals to keep them in power until 2025.
“It’s just ridiculous, insulting even. What planet do liberals live on? Housing is a fundamental right. It’s people’s lives that are at stake,” said NDP deputy leader Alexandre Boulerice during question period.
Regardless, Ms. Freeland and Housing Minister Sean Fraser have assured that the GST rebate provided for in Bill C-56 will not result in the construction of more “luxury condos.”
Ottawa hopes that the measure will convince builders to modify their condominium projects to transform them into the creation of new apartments.
“This is not a fictional principle. […] There are real projects [de la sorte] that I’ve heard about,” said Minister Fraser.
And, with material and labor costs reduced by the GST reimbursement, the Liberals want to bring about a reduction in rent costs.
A measure of more than $4.5 billion
Eliminating the GST revisits a 2015 election promise that the Liberals abandoned. At that time, Justin Trudeau’s troops anticipated that the measure would only apply to affordable housing.
The GST refund as proposed today must be retroactive to the date of its announcement, i.e. September 14. Ottawa is proposing that the measure be spread over approximately seven years.
However, the Ministry of Finance only estimated the cost of abolishing the GST over five years, amounting to more than $4.5 billion. Senior officials argued during a technical briefing that Ottawa’s budget forecasts typically do not extend beyond this period.
The government intends to specify by regulation which new constructions will qualify for reimbursement. Ottawa has already signaled its intention to apply the measure to housing comprising “at least four private apartments or at least 10 private rooms or suites,” said one of the officials. She added that 90% of the units in a building must be intended for long-term rental for it to be deemed eligible.
At a press briefing in New York, Prime Minister Trudeau urged the leaders of the opposition parties to allow the rapid adoption of Bill C-56.
“We are focused on making life more affordable and we will continue this work in the days and weeks to come,” he said.
However, it remains to be seen which party will support the Liberals, given the criticism already made by their usual dancing partner, the NDP.
The Bloc, for their part, said they doubt that the elimination of the GST will really lead to a drop in rental prices. “The exemption […] will stimulate the market, it is however clearly insufficient overall and there is no indication that tenants will ultimately benefit from this measure,” commented their finance spokesperson, Gabriel Ste-Marie.
As for the Conservatives, they are putting forward their own housing bill. Pierre Poilievre’s team also proposes the abolition of the GST on the construction of new rental housing. However, in their case, they intend to limit the measure to those “whose rental price is lower than the market value”.
More powers to the Competition Bureau
Other measures included in Bill C-56 are, however, well received by the Bloc and could likely please the New Democrats. These are legislative amendments aimed at giving more powers to the Competition Bureau of Canada.
“It is consumers who must be at the center of concerns and not commercial interests,” said the Minister of Innovation, François-Philippe Champagne.
A proposed change to the Competition Act aims in particular to allow the Bureau to require, through court orders, the production of information.
Another proposed amendment aims to eliminate a mechanism that allows companies to defend anti-competitive mergers when they can demonstrate efficiency gains.
These elements appear to join several portions of a bill tabled by NDP Leader Jagmeet Singh earlier this week.
The Business Council of Canada, for its part, tore apart the changes proposed by the Trudeau government, judging that they would “cast a chill on investment […] both foreign and domestic” and “negatively influence competition”.
According to the organization, stakeholders in the field were not adequately consulted for this “omnibus bill.”