Federal measures to counter the housing shortage

Increasing the supply of rental housing, especially by encouraging the construction of new units and freeing up some for short-term rental, are the main objectives of the measures announced by the Minister of Finance at the federal government's economic update on Tuesday.

(Picture by Adrian Wyld, La Presse Canadienne. Chrystia Freeland, Minister of Finance)

By Corinne Laberge

The article in La Presse raises in its introduction that "The housing crisis in Canada is such that the Trudeau government is ready to pull out all the stops to ensure the mobility of construction workers between provinces. The economic update presented by Finance Minister Chrystia Freeland includes an additional $15 billion for the construction of rental apartments."

Noting that Canada needs workers to build some 30,000 rental units in the face of a labour shortage, we learn that "the government plans to tackle this issue on two fronts: through immigration and through negotiations with the provinces".

"Housing is the top priority of this economic update, so much so that the government is announcing its intention to change the name of the Ministry of Infrastructure to the Ministry of Housing, Infrastructure and Communities," it points out.

Thus, "the additional $15 billion in loans for the construction of rental apartments starting in 2025-2026 brings this funding to over $40 billion". The Affordable Housing Fund has also been allocated $1 billion over three years by the federal government, which estimates that this sum will enable the construction of 7,000 units. "It also intends to stimulate the creation of new housing cooperatives by injecting an additional $309 million for the development program to be launched by the Canada Mortgage and Housing Corporation in 2024.

Furthermore, "The government will also try to better protect homeowners worried about losing their homes when their mortgages come up for renewal by subjecting financial institutions to a mortgage charter," reports the text.

TVA Nouvelles devotes this article to Minister Freeland's economic statement. "The lion's share of the new expenses comes from the elimination of the GST on the construction of new rental housing and the construction of affordable housing, measures already announced in recent months," it says.

Following the subtitle "Another tile for Airbnb", we read that faced with "a housing crisis of historic proportions, the Trudeau government is giving cities and provinces a boost to tackle short-term rental platforms". Specifically, as of January 1^st, "cities that have adopted bylaws will be able to deny tax deductions related to expenses incurred by landlords using these platforms, such as renovation costs". To this end, "Ottawa will provide $50 million over three years to cities to help enforce their bylaws".

Finally, this article by Antoine Trépanier, relayed by Le Soleil, points out that "housing is a cornerstone of the federal government's strategy to combat the rising cost of living". Financial institutions will therefore be subject to new obligations to "temporarily extend the amortization period for sub-prime mortgage holders" and offer them "the possibility of making lump-sum payments to avoid negative amortization, among other things".       

 

Encouraging announcements, but a few nuances...

At CORPIQ, we see this as a positive announcement from the federal government, with an encouraging angle along the lines of what needs to be done to stimulate housing construction within a difficult economic context. That being said, we're still waiting to hear the details of how these measures will be applied and whether, for example, they will involve certain conditions.

As for the announcement targeting short-term rentals on platforms such as Airbnb, while interesting, it remains to be put into perspective depending on the type of accommodation, whether it's in an urban center or a cottage, for example. 

In conclusion, as far as the mortgage charter is concerned, this measure can indeed help homeowners keep their homes and be able to cope with high interest rates. However, we don't believe that the initiative should encourage risky behavior. Postponing term maturities for too long can obviously mean paying more interest in the end.