Politicians, planners and stakeholders in British Columbia are welcoming Ottawa’s latest initiative to boost housing supply across the country — the axing of GST on the construction of all-new rental apartment buildings.
It’s an incentive Housing Minister Ravi Kahlon said B.C. has advocated for at the federal level for years and will offer some relief in a high interest environment that has put a squeeze on purpose-built rental projects in particular.
“We don’t charge PST on the sale of purpose-built rentals, so it puts B.C. in a good position to see more projects continue to proceed,” Kahlon said Friday.
News of the new incentive came just one day after federal Housing Minister Sean Fraser signalled that Ottawa is exploring avenues to lower costs for builders due to the current high interest rates from the Bank of Canada.
Kahlon said Thursday’s GST break won’t be enough to solve the housing crisis, but rather, is an “important signal” that the federal government is getting back into the housing game.
“The five per cent right off the top is a big difference right there, and will probably be the difference of a lot of projects that were thinking about not proceeding because the environment that we’re into now wanting to proceed,” he said.
In B.C., he said municipalities and the provincial government must also innovate to approve permits faster and find ways to build more efficiently, using fewer labourers and more prefabricated buildings.
“We’re going to need that if we want to meet our housing goals,” he said.
In April, the B.C. government announced a multibillion-dollar, four-point housing plan aimed at cracking down on soaring real estate prices, increasing construction and creating more rental units.
It promised legislation that allows up to four units on a single traditional housing lot, a tax on the proceeds of house-flipping, and a forgivable loan of 50 per cent of the cost of basement suite renovations, up to a maximum of $40,000 over five years, if the secondary suites are rented at below-market rate for at least five years.
It also includes measures to speed up permitting and reduce development costs, with a goal of leveraging the private sector. To date, the province has said it’s on track to meet its target of building 114,000 new units over 10 years.
On Thursday, Vancouver’s mayor and council approved a motion permitting lower-density neighbourhoods to allow up to eight homes on a single lot, as well as an amendment that would allow character homes to add new units to the dwelling.
Urban planner Andy Yan, director of Simon Fraser University’s City Program, said he didn’t “necessarily” think Ottawa’s GST break would have a huge impact in Metro Vancouver.
“This is really meant for units that are apartment buildings that are bigger than four, which unfortunately just missed the cutoff for rezoning for the missing middle that we did in Vancouver. Welcome to government in Canada,” he said.
“I think the part of this element is really, will these savings be passed on or will they be pocketed by the providers? I think that this is an honest discussion … when we talk about things like GST rebates or any tax rebates or tax exemptions, we have to really look at performance.”
Marika Albert, policy director of the BC Non-Profit Housing Association, said she thought Ottawa’s GST break would have a “significant impact” on rental prices.
“What we see in the non-profit sector is when you add additional costs like taxes or other types of fees, those costs actually are downloaded onto rents,” she explained.
“I was talking to one of our members today who was saying for one of their projects, they’re going to save $1.4 million and that $1.4 million would have had to be pencilled out to then be put on to rents.”
Ottawa’s GST break covers any project started before the end of 2030 and wrapped up by the end of 2035.
With the initiative incentivizing more building, however, Albert said she’d like to see more accompany supports for the industry, which is likely to encounter an even greater labour crunch than it already is.
— with files from Sean Previl and David Baxter