B.C. developers pushing for expanded tax rebate to jumpstart housing market
B.C. developers are pushing the province to seek federal funding so that a tax rebate can be extended to all buyers of new condos — not just first-time buyers — and to help reduce development cost charges charged by municipalities.
They are issuing the call in a bid to revive new-home sales and construction. The industry has been struggling to sell some 3,500 condos that are already built, and halting projects that are in the pipeline.
Local developers say they were moved to act, in part, because of recent changes announced in Ontario.
“I would say that Ontario has really taken the leadership role in housing policy,” said Michael Drummond, interim president and chief executive officer of the Urban Development Institute, which represents developers and the construction industry in B.C.
Last week, Ontario said it would expand eligibility for a 13 per cent harmonized sales tax rebate. Previously, the rebate was available only to first-time buyers who planned to live in their new homes, and the units had to be under $1 million. A partial rebate was also available for homes under $1.5 million.
With the changes, the rebate will now be available to repeat buyers who are purchasing new homes and plan to live in their units, as well as some investors who intend to rent out their units, if the homes are under $1.85 million.
A day later, on March 26, Ottawa introduced legislation to provide $1.7 billion to provinces and territories to implement measures to increase Canada’s housing supply.
“There seems to be a strong relationship between the prime minister and Premier (Doug) Ford,” said Drummond.
He said that the Urban Development Institute recently sent a letter to B.C. Premier David Eby and Prime Minister Mark Carney making it clear that “if you’re going to be spending money” on housing markets, expanding the goods and services tax rebate in B.C. would be equivalent to the recent changes in Ontario.
“The province reached out to us late last week and we’ve had some initial discussions,” said Drummond. “There is an allocation of money to the province, and the province is going to figure out how exactly they spend it.”
In a separate announcement this week, the federal government and Ontario said they will invest $8.8 billion over the next decade in infrastructure as a way to help municipalities reduce development cost charges they require developers to pay to help build roads and sewers.
Developers in B.C. and Ontario have been complaining that such charges have been increasing and make it more challenging for them to proceed with projects. Municipalities have argued they are necessary when developers build high-density projects.
In Ontario, the funding to support infrastructure costs will be given first to municipalities that cut their development cost charges by 50 per cent, and will be in place for three years.
Kevin Layden, president and chief executive officer of Wesbild, said that in B.C. the housing and municipal affairs ministry is misunderstanding the situation with housing starts and not seeing that many projects in the pipeline are being cancelled because development cost charges are not decreasing in tandem with falling rents.
“Minister (Christine) Boyle, with all due respect, keeps quoting (Canada Mortgage and Housing Corp.) housing starts, and saying that housing starts seem to be fine in B.C. But the way CMHC records their data, they don’t record a housing start until it goes above ground vertically.”
His point is that while construction starts appear to be rosy, it is not yet visible as more projects are being halted at an earlier stage because development cost charges have not been reduced to match rents that have been falling.
Boyle said in a statement to Postmedia that the housing construction sector is facing serious challenges.
“It’s important we act to continue to reduce the cost of delivering more homes for people,” she said. “We know we need to encourage the next wave of housing starts so that we can continue to see rents decline and help people get into the housing market. This can include taking steps to reduce the costs for people to buy new homes that are currently available.”
She added that the province looks forward to building on its partnership with the federal government and, “We’ve seen some interesting ideas arising in other places. Here in B.C., we are taking a serious look at housing construction to see what additional actions we can take to continue building homes for people.”