Can Ottawa make a dent in housing, grocery prices? What a new bill would do

The Liberal government is looking to spur the construction of new rental stock and increase competition in industries like Canada’s heavily concentrated grocery sector as part of a new bill aimed at improving affordability for Canadians facing a cost of living crisis.

Finance Minister Chrystia Freeland tabled Bill C-56, the Affordable Housing and Groceries Act, in the House of Commons on Thursday.

It includes two announcements previously signalled by Justin Trudeau’s government: giving a rebate for GST paid on the construction of new purpose-built rentals and reforms to the country’s competition laws aimed at giving more teeth to the federal watchdog.

The new bill, touted over the past week by Liberal ministers, headlines the fall sitting at the House of Commons where affordability issues have thus far dominated debate.

Freeland told reporters later in the day that the bill includes “historic” changes to the way competition law works in Canada, which she argued could have a meaningful impact on grocery prices.

Freeland said that while reform to the Competition Act would affect all industries in Canada, the Liberals’ focus is on grocery affordability.

“More competition will ease sticker shock at the grocery checkout line,” she said.

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Changes to the Competition Act proposed in the bill would be the first major review of that legislation since 2009, according to government officials who spoke to media Thursday.

The bill will give the Competition Bureau the ability to compel documents from subjects as part of its probes — something that was cited as a barrier to the watchdog’s investigation of concentration in the grocery sector earlier this year.

The changes would also remove the “efficiencies defence” in approving proposed mergers. The logic underpinning this argument had been that deals ought to be approved if the efficiency gains in a business’s operations would offset the drop in industry competition as a result of a merger or acquisition.

Freeland shared a blunt take on Canada’s existing competition law, calling it an “outlier” that has actually been about “driving consolidation” rather than preventing it.

She called out an existing framework that allows companies to takeover their peers rather than set prices to effectively compete against them as an “artificial shield” that businesses in Canada do not need.

“We believe our businesses are strong enough to compete,” she said. “We know that Canadians will benefit from a more competitive business landscape.”

The Liberals are also looking to empower the competition commissioner to address what Innovation Minister Francois-Philippe Champagne on Thursday called “anti-competitive covenants.”

He cited examples of grocers securing restrictions barring competitors from setting up shop within a set radius around that store — a barrier also highlighted in the Competition Bureau’s spring report on grocers — as something the commissioner could act on going forward.

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“It’s about time that we fix the Competition Act in Canada,” Champagne told reporters Thursday.

The new legislation comes after the Liberals met with the heads of Canada’s largest grocers on Monday and tasked the executives with coming up with individual plans to “stabilize” food prices for consumers. Champagne also met with the Canadian Federation of Independent Grocers and has teased “going after” food manufacturers to address inflation at the grocery store.

Fresh inflation data released this week from Statistics Canada shows grocery prices actually declined 0.4 per cent in August on a monthly basis. Annual inflation on groceries eased to 6.9 per cent last month, down from 8.5 per cent in July.

Bill C-56 also looks to tackle housing affordability by using tax breaks to incentivize developers to get shovels in the ground on new purpose-built rental projects as higher interest rates and material prices slow the pace of building in Canada.

According to officials, the new GST rebate for will apply to any building with at least 90 per cent of its units designated for long-term rental where construction started as of Sept. 14, when Trudeau first announced the proposal. Projects must have at least four private units to qualify for the rebate, or 10 individual units for student or senior living residences.

There are no quotas for affordable housing or otherwise below-market rents to be included in the approved projects.

According to the finance department, the measure will provide $25,000 of tax relief for a two-bedroom apartment valued at $500,000. Projects funded via the rebate must be “substantially completed” by 2036, according to the text of the bill.

The GST rebate is expected to last until the end of 2030 — the year that the Canada Mortgage and Housing Corp. has flagged the country will need to add some 3.5 million additional homes on top of the current pace of building to restore affordability to the national housing market.

Housing Minister Sean Fraser teased additional actions on the housing front coming in the fall session of Parliament.

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“This is a major measure, but it’s not the last one we’re going to advance,” he told reporters Thursday, but did not offer further details.

Conservative Leader Pierre Poilievre tabled a private members bill on Wednesday to pitch his own housing plan for Canada.

It proposes requiring cities to increase home building by 15 per cent each year to receive their usual infrastructure spending.

Cities that fail to meet that target would see a decrease in the federal dollars they receive, while those that exceed it would get additional money.

Funding for transit projects would also only be given to cities when high-density housing is constructed and occupied around transit stations.

The Conservative proposal would reallocate $100 million from the Housing Accelerator Fund to give additional money to communities that greatly exceed the housing targets.

The bill also proposes removing GST charges off rental developments that offer below-market rent prices, which stands in contrast with the Liberals’ plan to remove the tax off all rental developments.

NDP MP Daniel Blaikie called out both the Liberals and Conservatives on Thursday for failing to consider non-market housing units in their approaches to restore affordability in the sector.

He told reporters that the government needs to engage non-profit and co-operative housing players to bring a “full array of policy options to the table to combat the housing crisis.”

Now that Bill C-56 has been tabled, Blaikie told reporters that the NDP will take a “close look” at the specific provisions before answering whether the party would support the legislation and maintain its supply-and-confidence agreement with the Liberals.

Blaikie acknowledged that a GST reduction on purpose-built rentals “has its place in a comprehensive housing strategy,” but said the NDP would be pushing the Liberals to ensure they didn’t forget about the need for affordable housing.

— with files from the Canadian Press