With the election of Stephen Harper and the Conservatives as the new federal government, it is an important time in our industry to review not just our own priorities but also those of the new government. This article will set out CFAA’s priorities for the 2006 year, review Stephen Harper’s Spring agenda, and provide background on some of the key players in the new government.
CFAA’s Priorities:
1) Increase Funding to Housing Allowance Programs to address affordability issues
The number one priority of the CFAA is to increase funding for housing allowance programs. Canada is almost unique among countries with advanced economies in not having a national housing allowance program, and that is in part why the United Nations has criticized our housing policies. CFAA is a strong proponent of government putting money towards direct assistance to low-income renters. Whether in the form of rent supplements or portable housing allowances, direct assistance to low-income renters is the single most cost-effective way to reduce housing affordability problems.
CFAA will discuss the merits of a portable housing allowance program with the new Minister responsible for housing, Diane Finley. Ms. Finley was first elected in 2004 and re-elected in this past election to the riding of Haldimand-Norfolk. She is the Federal Minister of Social Development and Human Resources and is responsible for housing and CMHC. Ms. Finley has been described as a key player in the Harper government due to her position in cabinet and her husband’s role as Harper’s former chief of staff.
2) Focus any government funding for building new housing on housing for special needs that cannot be met by the private sector
The private sector will provide all the housing for which there is effective demand (i.e. both the desire for the housing and the ability to pay for it), at the lowest cost. Most households in core housing need already live in housing that is otherwise suitable; they simply need assistance to pay for it. For ordinary renters with low-incomes, building new housing is not the cost-effective solution because new housing is always relatively expensive. However, for people with special needs, new construction is often a good solution because it is cheaper to build in needed special facilities than to add them through renovation.
3) Obtain more favourable tax policies for the rental housing industry
Federal and provincial income tax treatment for rental properties is much less favourable than it was formerly, and in many cases less favourable than the treatment of
commercial property or shares or owner occupied homes. CFAA is pressing for the federal government to:
Restore rollover provisions for the calculation of CCA;
Eliminate the GST on rental housing operations;
Accelerate the elimination of the general capital tax;
Allow rental housing to qualify for small business tax treatment
Allow CCA deductions against other income; and
Increase the rate of capital cost allowances
CFAA will be contacting the new Federal Finance Minister, Jim Flaherty, regarding these tax reform measures. Minister Flaherty was the Finance Minister and Deputy Premier of Ontario under Premier Ernie Eves.
Tax Incentives for Renovations
One of CFAA’s new goals is to ensure that the Harper government follows through on its announcement that it plans to work with the provinces and municipalities to develop tax incentives for private-sector builders to renovate or construct buildings occupied at least in part by low-income tenants. By 2007-2008, the Conservatives plan to set aside $200 million annually in the form of federal tax credits. The income requirement is for at least 40% of the occupants to earn less than 60% of the local median income.
The CFAA will try to focus the program on renovations to existing units rather than on building new low-rent housing.
One of the Ministers responsible for this area is Lawrence Cannon, who is the new Federal Minister of Transport, Infrastructure, and Communities. Mr. Cannon was a Minister in Robert Bourassa’s Quebec government for 9 years, and served as a City Councillor in Gatineau. We hope to speak to Minister Cannon shortly to encourage a timely implementation of these tax incentives to spur renovation of existing private-sector buildings.
The Conservative Government’s Priorities
A minority government means some uncertainty as to the direction of the government. CFAA has been closely monitoring the early days of the Harper government in order to best understand their priorities.
We expect the Conservatives to act quickly on their top election promises, as the appetite to the defeat the government will be at its lowest point. We expect the Conservatives to introduce the following measures as part of their agenda during the Spring session:
(a) Reforms to the Criminal Justice System
(b) Child Care Allowance
(c) Capital Gains Deferral
(d) The GST Reduction
Two of these measures, the capital gains deferral and GST reduction, are very important to our industry. The Conservatives have pledged to eliminate the capital gains tax for individuals on the sale of assets when the proceeds are reinvested within six months. Therefore, Canadians who invest in property should be able to sell those assets and reinvest their profits back into the economy without paying tax on the capital gains. Vendors of depreciable assets like apartment buildings will presumably still face recapture of the CCA they have claimed if applicable.
Reducing the GST from 7% to 5% (in two steps) is also of great importance to residential landlords and tenants. The 2% reduction will make housing more affordable, which is especially important for low income tenants. Currently landlords do not charge GST on residential rents, but we do pay GST on costs such as heat, electricity and repairs, even though we receive no input tax credits for the GST paid on those costs. Through competition in the market places in which we operate, the savings in GST will result in lower rents to tenants.
In the upcoming months, CFAA will work hard on discussions with key players in the Harper government. CFAA will be ensuring that the new government is up to date on the concerns of our industry and that our issues receive attention. We will work with the new government to help them pass key planks of their election platform important to the rental housing industry such as the GST reduction.
PPMA is pleased to support CFAA as one of 16 member associations across Canada. Together, our members own or manage more than 1,000,000 rental homes. CFAA is the sole national organization representing the interests of Canada’s $30 billion rental housing industry. For more information, go to
www.cfaa-fcapi.org.
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