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A Toronto-based real estate company says it is planning to build 5,000 new rental units in urban centres across the country as a result of the federal government’s decision to eliminate GST charges on rental developments.
The CEO of Dream Unlimited Corp., Michael Cooper, says high interest rates and construction costs had put many projects on pause.
“A lot of projects that we had hoped to be able to start haven’t penciled out,” Cooper said.
But the federal government’s announcement that it would eliminate GST charges off rental developments – and the expectation that provinces would follow suit – has changed the calculation for Dream.
Finance Minister Chrystia Freeland introduced legislation last week that would provide a 100 per cent GST rebate for new rental developments. The measure has been called for by housing experts, advocates and developers who say more incentives are needed to spur purpose-built rentals.
Cooper says the full rebate is a game-changer because while retailers can pass on the cost of a sales tax to customers, rental developers have to pay the tax themselves.
“When you build an apartment, the person paying the rent doesn’t pay (sales tax),” Cooper said. “It makes a lot of apartments uneconomical.”
The announcement from the real estate company comes with a caveat: provinces would have to waive their sales taxes, too, and average interest rates would have to stay the same.
Dream plans to begin construction of more than 1,000 rental units in Ottawa, with one of the communities being built in partnership with the Multifaith Housing Initiative, a local non-profit affordable housing organization.
The two organizations were able to present the project together to the Canada Mortgage and Housing Corp. to take advantage of cheaper financing and provide more affordable housing units.
In Ottawa, about 40 per cent of the units are expected to be affordable, with those units’ rent prices either 33 per cent or 45 per cent below market value.
Both Dream and Multifaith Housing Initiative say the partnership between a non-profit organization and for-profit real estate company is a novel idea.
“What we’re getting out of it is that … we’re able to build these units at a much lower cost per square foot than we could do it on our own,” said Suzanne Le, executive director of the Multifaith Housing Initiative.
“It’s a very unique partnership, but it’s also an opportunity for how we look and build to the future.”
While the GST is already changing the calculation for rental developers, Cooper says there are other things the federal government could do to help spur purpose-built rentals. Those include simplifying the CMHC’s approval process, providing other tax incentives and helping with cheaper financing.
Prime Minister Justin Trudeau’s government has promised to unveil more measures aimed at increasing the housing stock in the country, with all eyes on the upcoming fall budget update.
According the CMHC, the country needs to build about 3.5 million more units than its current pace of building by 2030 to restore affordability.
Cooper says he’s happy to see a more robust discussion happening in the country on housing, but he noted that the crisis is the result of all parties and levels of government not doing enough over the last 40 years.
“We all share the blame. But I’m really happy to see that everybody’s stepping up and dealing with trying to find solutions now.”
© 2023 The Canadian Press