e-3239 (Business and trade)

The Government of Canada would like to thank the petitioners for sharing their views on housing affordability and homelessness. High housing costs, especially in urban centres, continue to place middle class and low-income Canadians under huge financial pressure. A long-term plan for a faster-growing Canadian economy must include housing that is affordable for working Canadians, especially young families. Stable housing is critical for communities and for a strong middle class. This why Canada's National Housing Strategy (NHS) was launched in November 2017 and is a 10-year, now, $70+ billion plan that gives more Canadians a place to call home. Building on this, Budget 2021 proposes to invest $2.5 billion, and reallocate $1.3 billion in existing funding to speed up the construction, repair, or support of 35,000 affordable housing units.

Approximately 1.7 million Canadian households were in core housing need in 2016, over 1.5 million of which were experiencing affordability issues (Statistic Canada 2016). To respond to affordability challenges in housing, people, and the belief that every Canadian deserves a safe and affordable home, are at the center of Canada’s first ever National Housing Strategy (NHS).

To help more Canadians access housing that meets their needs and they can afford, the NHS sets out to achieve bold outcomes by 2027-2028, including:  

• Reducing or eliminating housing need for 530,000 households; 
• Creating 160,000* new housing units, and repairing and renewing more than 300,000?housing units; and,  
• Protecting 385,000 community housing units and expanding by another 55,000 units. 

*Targets for new housing units account for the new investments announced in 2020. 

COVID-19 has exacerbated many of the hardships faced by Canadians experiencing homelessness and housing insecurity. The 2020 Speech from the Throne and Budget 2021 included a commitment to entirely end chronic homelessness in Canada, increasing the level of ambition of the National Housing Strategy’s stated goal of a 50% reduction in chronic homelessness by 2027-28. Through the pandemic, the government has more than doubled funding for Reaching Home: Canada’s Homelessness Strategy. Budget 2021 proposes to provide an additional $567 million over two years for Reaching Home. This would generally maintain the 2021-22 funding levels announced in the 2020 Fall Economic Statement in response to the pressures of COVID-19. Budget 2021 also proposes to provide $45 million over two years, for a pilot program aimed at reducing veteran homelessness through the provision of rent supplements, and wrap-around services for homeless veterans such as counselling, addiction treatment, and help finding a job.

In regard to economic realities faced by Canadians, various indicators and measures are used to understand and address affordability challenges for Canadians. The traditional metric used to measure housing affordability, the 30% shelter cost-to-income ratio (STIR), gives an overall view of what percentage of a household’s income is being spent on shelter costs. Recognizing that there are other ways to reflect the economic realities related to housing that Canadians face, Canada Mortgage and Housing Corporation (CMHC) committed through the NHS to developing a new indicator that would measure the ability of a household to afford basic goods such as food and transportation after paying for housing. Information about this new measure, the housing hardship measure, was published in January 2020, and defines a household as being in Housing Hardship if it cannot afford a basic basket of non-housing goods and services after paying for their Housing.  More information on this new indicator can be found here: https://www.cmhc-schl.gc.ca/en/blog/2020-housing-observer/new-affordability-metric-assesses-household-ability-afford-basic-goods

Concerning covenants on affordable housing units built under the NHS:

• The supply programs under the National Housing Strategy – including the Affordable Housing Innovation Fund, Rental Construction Financing Initiative, National Housing Co-Investment Fund, Federal Lands Initiative and Rapid Housing Initiative – each have varying minimum requirements pertaining to housing affordability and project viability and sustainability.

• Special covenants are incorporated into the contractual agreements with proponents under each of these programs to ensure affordability requirements are adhered to for the prescribed period.

Through the National Housing Strategy, the Government of Canada is prioritizing funding for non-profit and co-operative housing providers.

• Partnerships with non-profit housing providers are prioritized under the National Housing Co-Investment Fund, which supports the creation of new affordable housing and the repair and renewal of existing affordable and community housing. The Government is investing $13.2 billion over 10 years to create 60,000 new housing units and repair or renew 240,000 housing units. As of March 31, 2021, the Government has committed over $3.6 billion to support the creation of close to 13,900 new units and the repair and renewal of 74,600 units.

• The Government is investing $500 million over 10 years through the Federal Community Housing Initiative to support federally administered community housing projects reaching the end of their operating agreements from past social housing programs. This initiative will benefit the non-profit and co-operative housing providers that own federally administered community housing. As of March 31, 2020, over $14.8 million in rent assistance has been provided to over 5,200 low-income units, supporting over 24,622 community housing units. Budget 2021 proposes an additional investment of $118.2 million over seven years through this initiative to support non-profit and co-operative community housing providers that deliver long-term housing to many households that are vulnerable.
• Through the Canada Community Housing Initiative, the federal government provides $4.3 billion over 9 years (cost-matched by provinces and territories for a total $8.6 billion investment) to provinces and territories to protect, regenerate and expand social housing through ongoing support to housing providers delivering subsidized housing, including Urban Native Social Housing units. As of December 31, 2020, provinces and territories had committed $192.8 million to support 45,400 units.

The Government of Canada is currently on track to deliver Canada’s first-ever National Housing Strategy: a ten-year plan to help improve the affordability, availability, and quality of housing for Canadians. Having a safe and affordable place to call home is more important than ever, particularly for those made vulnerable among us.

Department of Finance

The Government thanks the petitioners for expressing their views about the importance of affordable housing. We are committed to every Canadian having a safe and affordable place to call home, which is why we have invested:

• Over $70 billion in the National Housing Strategy, launched in 2017, that will support the construction of up to 125,000 affordable homes and increase Canada’s housing supply.
• The First-Time Home Buyer Incentive, which reduces a first-time buyer’s mortgage payments to make buying a home more affordable. The government recently expanded access to this support, to make sure more middle class Canadians in Toronto, Vancouver, and Victoria, who live in Canada’s most expensive housing markets, can benefit from this support.
• The Rapid Housing Initiative to address urgent housing needs for vulnerable Canadians in all regions of Canada. This $1 billion program will be expanded with an additional $1.5 billion from the recent federal budget.
• On January 1, 2022, our government will introduce Canada's first national tax on vacant property owned by non-resident, non-Canadians. Houses should not be passive investment vehicles for offshore money. They should be homes for Canadian families.
• An unprecedented $300 million investment, through the Rental Construction Housing Initiative, to support the conversion of the empty office space that has appeared in our downtowns into affordable housing.
• The largest transit investment in Canadian history to build public transit across Canada, from urban to rural areas, and to make our communities more livable and more affordable. This is critical to supporting working families and providing them with more options of where to buy a home in Canada. The federal government will invest $14.9 billion in public transit projects over the next eight years, with $3 billion per year in permanent funding.

Part 3)  Remove tax exemptions for REITs

Real Estate Investment Trusts (REITs) are generally publicly traded Canadian trusts that earn passive income from real estate (e.g., rental income). They benefit from a flow-through tax treatment to the extent that they distribute their profits out to their investors. Therefore, rental income earned by a REIT is generally taxed in a similar way whether it is earned by a REIT and distributed to an investor or earned directly by an unincorporated landlord. Given the similar tax treatment applicable in both scenarios, the Government is of the view that REITs are not subject to a preferential tax treatment in this context. While rental income earned by a Canadian-controlled private corporation (CCPC) does not explicitly, benefit from a flow-through treatment, the tax system does contain provisions (such as the Refundable Dividend Tax On Hand (RDTOH) and the Dividend Tax Credit) which allow passive income earned by a CCPC to be distributed to shareholders so that the total corporate and personal tax liability is roughly equivalent to the tax liability otherwise payable if the rental income was earned directly by an unincorporated landlord. Overall, there is a generally neutral tax treatment on rental income whether that income is earned through a REIT, through a CCPC, or directly by an unincorporated landlord

Part 4)  Increase regulation of foreign investment in residential real estate

The federal government continues to make significant investments in new initiatives to strengthen Canada’s Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime, including specific actions to counter money laundering in real estate from either domestic or foreign sources.

For example, Budget 2019 announced the creation of new dedicated real estate audit teams at the Canada Revenue Agency to monitor transactions in the real estate sector. Furthermore, it provided additional funding to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to increase its enforcement activities in the real estate sector to better deter, detect, and prevent financial crime. Regulated entities under the Canadian anti-money laundering and anti-terrorist financing Regime such as real estate brokers, real estate developers and banks have obligations, which include reporting suspicious transactions, record keeping and client identification.

More recently, Budget 2021 proposes to provide $2.1 million over two years to Innovation, Science and Economic Development Canada to support the implementation of a publicly accessible corporate beneficial ownership registry by 2025. This will help make beneficial ownership information more available to counter the misuse of corporations for illicit purposes.

Recent regulatory amendments (coming into force June 2021) have strengthened AML/ATF obligations for all reporting sectors, including the real estate sector. For example, real estate agents, brokers and developers will be required to take reasonable measures during certain transactions or activities to collect beneficial ownership information, determine if a client is a politically exposed person, and to take enhanced measures if the client is high-risk. The latter includes specific obligations such as establishing the client’s source of funds and source of wealth, and obtaining senior management review of a transaction of $100,000 or more.

In addition, Budget 2021 announced the government’s intention to implement a national, annual 1 per cent tax on the value of non-resident, non-Canadian owned residential real estate that is considered to be vacant or underused, effective January 1, 2022.

Part 7)  Create an empty home tax for residential property owners who leave buildings and units vacant

Budget 2021 announced the government’s intention to implement a national, annual 1 per cent tax on the value of non-resident, non-Canadian owned residential real estate that is considered to be vacant or underused, effective January 1, 2022.

Part 8)  Regulate investors out of residential real estate that is priced below median regional prices to increase access to affordable properties for Canadians buying homes

Every Canadian deserves a safe and affordable place to call home, whether that means owning or renting within their community. Finding an affordable place to call home is a challenge for many Canadians, particularly in the largest cities like Toronto and Vancouver where the rising cost of living, limited housing supply, and strong population growth have pushed home purchase and rental costs beyond what many people can afford.

The Government of Canada is committed to supporting housing affordability, in particular for those who are finding it increasingly difficult to find an affordable place to rent, or to purchase their first home.

The Government’s guarantee of insured mortgages helps facilitate Canadians’ access to mortgage financing at low rates, thereby supporting Canadians in becoming homeowners.

The Government is also on track to deliver over $70 billion by 2027-28 under the National Housing Strategy to help more Canadians find a place to call home. For example, Budget 2021 announced additional funding of $1.5 billion for the Rapid Housing Initiative in 2021-22 to address the urgent housing needs of vulnerable Canadians.

To make homeownership more affordable, the Government launched the $1.25 billion First-Time Home Buyer Incentive in September 2019, which gives eligible first-time home buyers the ability to lower their borrowing costs by sharing the cost of buying a home with the government. As announced in the 2020 Fall Economic Statement, the Government is expanding the First-Time Home Buyer Incentive to enhance eligibility in the higher priced markets of Toronto, Vancouver and Victoria. The expansion will be available this spring.

As noted above, the regulation of residential real estate is generally a property rights matter, which is a provincial jurisdiction.  At the same time, our Government recognizes that different levels of government must work together to fully understand the housing challenges impacting our communities, and how best to address them together. For example, the Governments of Canada and British Columbia are partners in the establishment of the Expert Panel on the Future of Housing Affordability and Supply, which has a mandate to identify and evaluate measures that different levels of government can take to increase the supply of housing and to improve affordability in high-priced markets in British Columbia. The Panel is expected to provide its final report later this spring.