Local housing action: How provinces are responding to Ottawa’s construction tax cut
Officials are calling on provinces to do their part in encouraging housing development.
Prime Minister Justin Trudeau visits a housing project in Ontario. – Government of Canada
After announcing federal GST will be dropped for new rental apartment projects, Ottawa is urging provinces across Canada to do their part and cut taxes for affordable housing projects.
The response from provinces has been mixed. Some moved quickly to announce plans to eliminate similar provincial taxes, others said they would consider it and some rejected the idea altogether.
Here is a round up of provincial responses to Ottawa’s efforts:
Ontario has committed to eliminate provincial sales tax from new rental construction as soon as possible. They also plan to update the definition of “affordable” housing when it comes to reductions and exemptions to fees developers pay when building those units. Last year the province unveiled legislation, the More Homes Built Faster Act, to cut fees for affordable, non-profit housing projects. The legislation also allows for the development of three units on any residential lot across the province. Cities are acting as well. Earlier this year Toronto adopted the Official Plan Amendment and Zoning By-law Amendment to permit multiplexes citywide.
Ravi Kahlon, minister of housing, noted after the federal announcement that B.C. already doesn’t charge PST on purpose-built rentals, putting it in a good position to see more projects get built. Major cities like Victoria and Vancouver have implemented major zoning reforms to encourage density in single-family home neighbourhoods. Vancouver is opening up neighbourhoods across the city to allow for the development of multiplexes and Victoria will allow more houseplexes, corner townhouses and heritage conserving infill housing in residential areas. B.C. premier David Eby recently announced new initiatives to consolidate parts of the application process so permits get sped up. They will also pilot a new program that offers forgivable $40,000 loans for homeowners that want to create rental suites.
Newfoundland and Labrador
Soon after the federal announcement, Newfoundland and Labrador officials vowed to waive the provincial portion of HST on new apartment complexes. Newfoundland and Labrador have a blended, 15% HST. 10% goes to the province and 5% goes to Ottawa. Calls for action in the region have been growing after a report from earlier this year showed that more than one-third of N.L.’s population is spending more than 30% of their income on housing.
Jason Nixon, Alberta’s housing minister, called Ottawa’s tax cuts a “step in the right direction” but urged officials to focus on removing the carbon tax and new building energy efficiency regulations that he says drive up the cost of homes. Meanwhile, in Calgary, officials approved sweeping housing strategy changes that include allowing the construction of row houses and duplexes on land zoned for single-family homes. The move comes on the heels of a devastating report that shows one in five Calgarians live in housing they can’t afford.
The Saskatchewan government said it is not considering a similar tax cut, despite pressure from home builders’ associations and other groups. Finance Minister Donna Harpauer has told reporters that the province believes the broad application of PST ensures that a fairly applied, reliable, and sustainable source of revenue is available to finance vital public services. Instead, the province is drawing attention to its Rental Development Program, a one-time funding allowance for housing organizations to develop affordable units for low-income households. The province drew significant criticism from the construction sector in 2017 when construction labour became subject to PST.
For some provinces, construction taxes have become a major election issue. Manitoba NDP Leader Wab Kinew announced he plans to eliminate the provincial sales tax from the construction of new rental units if his party wins the Oct. 3 provincial election. The province is also currently in the midst of a $126M homelessness strategy dubbed A Place for Everyone. The strategy’s goal is to create hundreds of new social housing units and new wrap-around services.
Quebec has not been swayed by the federal announcement. Premier François Legault stated that he will won’t eliminate its sales tax on construction materials in order to stimulate the building of rental properties to address the housing crisis, arguing that any benefit would be outweighed by the cost. The province is also facing criticism for Bill 31, which would allow owners to stop tenants from transferring their leases. Legault stated he is considering walking back the provision. A recent study showed the number of unhoused people in Quebec has risen to around 10,000, a 44% increase since 2018.
Federal officials have written to Nova Scotia, urging them to remove the provincial portion of the harmonized sales tax. So far, only the province’s Liberal leader Zach Churchill has expressed support for the cuts. Premier Tim Houston’s strategy has been to steps to expedite private sector builds and provide land and funding to help non-profit organizations raise developments. Houston has also accused municipalities of dragging their feet on on approvals and raising fees for developers.
Prince Edward Island
Soon after the federal announcement, P.E.I officals stated that they would this initiative a step further by looking at a complementary program to remove the provincial portion of HST on new rental builds. Earlier this year, officials said they are working with community partners and stakeholders to come up with a comprehensive housing strategy.