Here is a rundown of what this bill means for Canadians, and how it could affect construction housing and grocery prices moving forward.
WHAT THE LIBERALS’ AFFORDABILITY BILL MEANS FOR CANADIANS, AND HOW IT WILL AFFECT HOUSING AND FOOD PRICES
The goal of the measure is to incentivize the construction of long-term rentals, meaning more apartment buildings, student housing, and seniors residences.
Although these details will be included in regulation at a further date, senior government officials indicated in a technical briefing to the media that the measure is directed at buildings with at least four private apartment units, or residences with at least 10 private rooms.
The other requirement is that 90 per cent of the residential units in the buildings have to be designated for long-term rentals. The measure would not apply to luxury condominiums or rental units to be converted afterwards into short-term vacation rentals, like an Airbnb.
The measure does not just apply to new builds, but also a “substantial renovation” that would transform an existing building into new rental units. For instance, builders could decide to convert a hotel or a motel into apartments or private residences and still receive the rebate.
How long will the program run?
Housing Minister Sean Fraser told reporters that a seven year gap to start construction would allow builders to plan ahead what their next cycle of construction projects would look like.
Does the GST rebate apply only to affordable housing?
No. Unlike Conservative Leader Pierre Poilievre’s housing plan, which only cuts the federal tax for rental buildings below the market rate, the Liberals’ GST rebate has no such threshold.
Freeland indicated in a press conference on Thursday that the government’s objective is to “create economic conditions to help with the construction of more rental housing” by incentivizing large companies to switch gears and build up more supply.
Housing Minister Fraser says the strategy has already started to produce results. “There are real projects I’ve become aware of that were being designed as condo projects that are now going to be converted to apartment rentals as a result of this change,” he said.
The federal government can’t stop developers that benefit from the GST rebate from trying to bend the rules, for instance, by converting their rental units into AirBnbs.
But senior government officials told the media it would be their expectation that the Canada Revenue Agency will conduct an audit if it was discovered that those units were sold off after a fairly short period of time and if there was an intention to use those units for short-term rentals.
How much will the GST rebate for rental units cost?
It is expected that the measure will cost $4.565 billion over the fiscal period of 2023-2024 to 2028-2029, according to the federal government’s estimates.
Senior government officials told reporters who were pressing them for the complete cost that, as a general rule, Finance Canada only provides cost estimates for a period of five years.
Will other provinces follow suit by removing the provincial tax on rental units?
Provinces like Ontario, British Columbia and Newfoundland and Labrador have already confirmed they would be following the federal government’s lead by eliminating provincial taxes on new rentals, but Quebec is resisting the idea, which it estimates would be too costly.
“We know that we can’t do it alone, but we can use federal leadership and federal funding to drive provincial change and to drive municipal change,” he said on Thursday.
How will the Competition Act be amended to enhance competition?
The proposed changes in C-56 intend to do three things. First, it would give more power to the Competition Bureau to investigate when industries are behaving unfairly, for instance, when there are instances of price fixing or price gouging, and take enforcement action.
Second, it would repeal the “efficiencies defence” in order to end what the government sees as “anti-competitive” mergers that raise prices and limit choices for Canadian consumers.
Lastly, it would expand the scope of reviewable agreements that could stifle competition and choice for consumers, such as “restrictive covenants” where large grocers could prevent smaller competitors from establishing operations nearby.
Why were these changes necessary?
Senior government officials said this deficiency was made clear by the Bureau’s recent retail grocery market study, which “did not benefit from fulsome co-operation by market participants.”
“With these changes, Canada will benefit from an empowered watchdog in the pursuit of greater competition. One that can bring more transparency to the market, effectively block harmful mergers and review all forms of prejudicial agreement,” said one of the officials.
Will these changes actually stabilize or lower grocery prices?
Although this bill has been rebranded as an act for more affordable groceries, the changes related to the Competition Act are very broad and will not directly affect food prices. But it is expected to increase competition which could, eventually, have an impact on them.
Industry Minister Francois-Philippe Champagne, however, said that “taking these big chunks in terms of reforming competition in the country will lead to lower prices” and that international examples have shown that increased competition is the best way to achieve those results.
Story by: National Post