April saw a very big federal announcement around tackling the housing supply and affordability crisis: the highly ambitious (and very long-awaited) Canada Housing Plan.
By now, we've all had time to absorb what the feds have in store, with lots of experts weighing in on the “hits” and “misses” of this massive housing strategy. After reading through it myself, digesting all the commentary, and talking to some well-informed colleagues, I think the following changes are particularly noteworthy:
1. Finally, A “Systems” Approach
Canada's Housing Plan is finally looking at the issue from a big-picture perspective. Our industry (and others) have been asking for this for years. The government has come to terms with the fact that unrealistic promises and short-term Band-Aid solutions simply aren't cutting it.
The only way through is to ensure everyone and everything that impacts housing is factored in – from finding ways to increase participation in trades in order to reduce labour shortages, to strengthening inadequate infrastructure, to breaking down municipal roadblocks. Addressing housing as a systemic problem is a huge first step.
Per the Federal Government, Canada’s Housing Plan has three key goals:
“A. Building more homes by bringing down the costs of homebuilding, helping cities make it easier to build homes at a faster pace, changing the way Canadian homebuilders manufacture homes, and growing the workforce to ensure we get the job done.
B. Making it easier to own or rent a home by ensuring that every renter or homeowner has a home that suits their needs, and the stability to retain it.
C. Helping Canadians who can't afford a home by building more affordable housing for students, seniors, persons with disabilities, equity-deserving communities, and eliminating chronic homelessness in Canada.”
READ: Why Is The Toronto Real Estate Market So Resilient? An Expert Explains
2. Changing Attitudes
Canadians have long held the notion that when it comes to home ownership and lifestyle, single-family houses are the ultimate goal. However in our growing cities, that attitude simply isn't feasible anymore. Municipalities like Toronto have already given the green light to density-friendly options like garden and laneway homes.
The new housing plan takes this mindset even further by incentivizing developers to build homes above shops and businesses, offering low-cost financing for additional suites in single-family structures, and helping municipalities pivot to allow these changes and streamline approvals.
3. Vacant Land Taxes
Providing landowners a financial incentive to develop property rather than sit on it has the potential to increase housing supply. Consultations on this will be launched later in the year.
4. Increasing The Capital Gains Inclusion Rate
The feds intend to raise the inclusion rate on capital gains realized annually above $250,000 for individuals – and on all capital gains for corporations and trusts, effective June 25, 2024. (The $250K limit is not prorated for 2024, and only applies to gains realized after June 25.) This change is intended to affect investor behaviour: taxing investments at a higher rate is likely to impact housing investment and market dynamics, freeing up more properties for single families to buy.
5. Restrictions On Single-Family Home Purchases By Large Corporate Investors
When a typical family is buying a house, they expect to be going up against other buyers like themselves – not some giant private equity firm with unlimited resources. One of the plan’s strategies to increase affordability is addressing the “financialization of housing.” They aim to restrict very large corporate investors from buying existing single-family homes.
This could certainly help alleviate competition in the housing market, potentially making things more accessible for individuals. Further details will be provided in the 2024 fall economic statement.
6. Looking At Alternative Funding
The government wants to get more buyers into their first homes: strategies include extending amortizations to 30 years, extending repayment windows for home buyer loans, and strengthening the Canadian Mortgage Charter. They are also exploring ways to expand access to alternative financing such as Halal mortgages, so first-time buyers have more options for mortgages.
Final Thoughts
These six points are just a small sampling of the measures being proposed in Canada's Housing Plan – I’m really just scratching the surface. Overall, I have to say I'm pleased to see the government taking this holistic, systems approach. I believe these strategies will add to the supply and make housing more accessible for more Canadians.
Is it realistic? Will they hit their ambitious goals? It would be nice to say yes, but making changes of this scale is like getting a giant ship to change directions on a dime. You can't make it happen right away. It takes time, a lot of coordination, and the participation of everyone who needs to be involved in making the shift.
Ultimately, the success of Canada’s Housing Plan will depend on how the changes are implemented, how well they align with provincial and municipal efforts already in the works – and how the market responds.
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This article was produced in partnership with STOREYS Custom Studio.
