Boosting housing supply requires governments to co-ordinate

By
Millicent Wong
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0
219
financial contribution

  1. property

Governments can reduce barriers to building new homes by changing restrictive zoning and cutting red tape

Published on August 23, 2023 • Last update 4 days ago • 3 minutes reading time

A construction worker builds a new house in London, Ontario. A construction worker builds a new house in London, Ontario. Photo by Mike Hensen/Postmedia

There is no “one-size-fits-all” solution to Canada’s housing crisis, according to a new report by economists at financial services cooperative Desjardins Group, but policymakers can move forward if all levels of government take a coordinated approach to solving the problem, while outlining a range of possible policy options.

“As the situation became more serious, all levels of government had to realize that something urgently needed to be done. But there is no agreement on what to do,” the Aug. 22 report said.

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The Desjardins report stressed that the first duty of governments at all levels should be “to do no harm” by reducing or eliminating measures that exacerbate the problem.

In the context of housing construction, this starts with removing barriers to new housing construction by changing restrictive zoning and removing red tape to speed up the process and reduce costs.

They also suggest that the government address market-level inefficiencies and opportunities for more building incentives.

“For example, landowners in Finland responded positively to an increase in taxes on vacant urban land by building more single-family homes,” says the report.

At the federal level, measures such as low-interest loans from Canada Mortgage and Housing Corp. (2020) and tax breaks to lower the cost of capital are possible options, but other strategies should also be implemented, it said.

“Other proposals include a deferred capital gains tax and a reclaimed capital cost deduction on the sale of rental housing if the proceeds are reinvested in rental properties,” the report said. “These and similar measures could help create a level playing field between purpose-built rental housing and owner-occupied housing. Tax breaks could also be granted to new low and medium sized apartment buildings and other forms of missing middle housing.”

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The report notes that incentives for housing are paramount and that the Housing Accelerator Fund, which encourages the development of affordable, inclusive and diverse, low-carbon and climate-resilient communities, is “a good start”, but its impact is was limited and its execution was found to be defective.

“By listening to other levels of government, the federal government can improve transfer alignment and remove construction barriers. Other tax incentives, such as excluding GST/HST on purpose-built rentals, should also be explored,” the report said.

Desjardins also stressed that the federal government must take measures to ensure that population growth is in line with sustainability goals. Prioritizing immigrants with skills in craft trades may help offset the challenges posed by an aging construction workforce.

In the federal government’s Immigration Levels Plan 2023-2025, Canada announced that it will increase its immigration targets, planning to accept 460,000 people in 2023, 485,000 in 2024 and 500,000 in 2025.

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In May, Sean Fraser, then Secretary of State for Immigration, Refugees and Citizenship, introduced the first category-based selection in Canada’s express entry system. This will allow Canada to issue invitations to prospective permanent residents based on specific skills, education or language proficiency. Those listed include tradesmen such as carpenters, plumbers and contractors.

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At the provincial level, Desjardins points to Quebec’s recent introduction of provincial licensing for short-term rentals as a model that other provinces could emulate. Meanwhile, the agency is recommending a range of strategies at the community and building level, including ending exclusion zoning, converting underutilized malls into housing, and promoting state-of-the-art housing solutions such as prefabricated homes.

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