Canada’s government proposing new affordability measures
Canada’s Finance Minister, Chrystia Freeland, has tabled a new bill with the House of Commons to improve affordability in Canada.
Bill C-56, the Affordable Housing and Groceries Act, has two main components. The first is to change the Excise Tax Act to add an enhancement to the GST New Residential Rental Property Rebate.
The second is to create a framework for Canada’s Minister of Industry to ask the Commission of Competition to conduct an inquiry into the state of competition in a market or industry as well as give the Competition Tribunal permission to make certain orders, even if none of the parties to the agreement are competitors. It also plans to repeal an exception to the current act that involves efficiency gains through mergers.
Tax rebate for new rental builds
The tax rebate means that builders who invest in building new rental properties may be eligible for a significant tax rebate. This is meant to act as an incentive to increase the number of rental properties in Canada and help drive down prices.
According to a government news release about the Act, the enhancement increases the GST Rental Rebate from 36 per cent to 100 per cent and removes the existing GST Rental Rebate phase-out thresholds, for new rental housing projects.
For example, for a two-bedroom rental unit valued at $500,000, the enhanced GST Rental Rebate would deliver $25,000 in tax relief.
Rentals.ca says the average cost to rent a one-bedroom apartment in Canada is $2,117. This is often much higher in Canada’s largest cities such as Vancouver ($2,988) and Toronto ($2,620). This can create significant challenges for newcomers who often need to rent their first home in Canada while they settle.
Buying a home is also often out of reach, for most newcomers as well as Canadians, due to a lack of supply to meet the demand for affordable housing in Canada. The average cost of a home in Canada exceeds $600,000 according to the Canadian Real Estate Association.
In contrast, Statistics Canada released a report in late 2021 that showed that immigrants who arrived in Canada in 2018, had a median wage of $31,900 in 2019. Talent.com, a popular job search engine, reported that the median entry-level salary for a newcomer in 2023 is $41,858.
The updates to the Competition Act are expected to benefit Canada by giving more power to the Competition Bureau to investigate when industries are behaving unfairly. The government says this will have an impact where price fixing, or price gouging is occurring (such as is sometimes seen in grocery stores) and take enforcement action.
Further, by removing the efficiencies defence, it may put an end to anti-competitive mergers that raise prices and limit choices for Canadian consumers. The bureau will be given the power to block collaborations that discourage competition and consumer choice.
Blocking mergers and collaborations will increase competition and this should result in prices lowering (or at least not getting any higher) to attract and retain customers.