The Canadian Bar Association is warning Ottawa that federal legislation to build more rental housing is worded in such a way that it could inadvertently discourage housing construction.
“While the intention is to incentivize construction the arbitrariness of the proposed implementation could inadvertently discourage the supply of rental housing,” the Bar Association’s tax law section wrote to the Senate National Finance Committee, according to Blacklock’s Reporter.
The group representing 37,000 lawyers said Bill C-56, An Act to amend the Excise Tax Act and the Competition Act, is an “all or nothing” act with terms that are poorly defined and could cause project delays. The bill grants a GST holiday on all new “purpose-built rental housing” constructed from Sept. 13, 2023, to Jan. 1, 2036, at a cost of $4.6 billion over five years according to the latest Fall Economic Statement.
Lawyers told the Senate committee that “construction” is not defined in the Excise Tax Act or Bill C-56. “Several points along the development process could potentially be considered the ‘beginning’ of construction. This uncertainty has caused current projects to be delayed while the issue is resolved,” the group said.
The association also wrote that under the bill, construction would have to be ‘substantially completed’ before 2036 to qualify for the enhanced rebate. “If substantial completion occurs on January 1, 2036 for example the rental property no longer qualifies,” it said.
The lawyers also pointed out that supply chain disruptions, the availability of labour, poor weather, and changes to municipal land use regulations can cause delays that are “largely outside a builder’s control.”
Housing Minister Sean Fraser previously testified at the House of Commons human resources committee that he anticipated thousands of new apartments would be built as a result of the legislation.
“This is going to cause an awful lot of home builders to take that project that has been yellow-lit, green-light it and start building right away. This is going to have a major impact. It is one of the most important things we could do,” he said.
Mr. Fraser said he had seen estimates that said by removing the GS, there could be 200,000 to 300,000 new homes built over the next ten years. Canada requires 3,500,000 new homes by 2030 in addition to current construction levels to restore housing affordability, according to a 2022 Canada Mortgage and Housing Corporation report.
