The developer says it is on track to build 5,000 rental units due to the Liberals’ break on GST
Published September 26, 2023 at 5:36 AM ET
A Toronto-based real estate company says it plans to build 5,000 new rental units in urban centers across the country as a result of the federal government’s decision to eliminate GST duties on rental projects.
Dream Unlimited Corp. CEO Michael Cooper says rising interest rates and construction costs have put many projects on pause.
“A lot of the projects we were hoping to be able to start haven’t been decided yet,” Cooper said.
But the federal government’s announcement that it will waive GST duties on rental projects – and the expectation that provinces will follow suit – has changed Dream’s calculus.
Finance Minister Chrystia Freeland introduced legislation last week that would provide a 100 percent GST rebate on new rental projects. The measure has been called for by housing experts, advocates and developers who say more incentives are needed to stimulate purpose-built rentals.
Cooper says the full rebate would be a game-changer because while retailers can pass on the cost of 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: Counties will have to waive their sales taxes, too, and average interest rates will have to stay the same.
Dream plans to begin construction of more than 1,000 rental units in Ottawa, with one of the communities built in partnership with the Interfaith Housing Initiative, a local affordable housing non-profit.
The two organizations were able to submit the project together to Canada Mortgage and Housing Corporation to take advantage of cheaper financing and provide affordable housing units.
In Ottawa, about 40 per cent of units are expected to be affordable, with rents for those units either 33 per cent or 45 per cent below market value.
Both the Dream and Interfaith Housing Initiative say the partnership between a nonprofit organization and a for-profit real estate company is a new idea.
“What we take away from this is that we are able to build these units at a much lower cost per square foot than we could do on our own,” said Susan Low, executive director of Multifaith Housing. initiative.
“It’s a very unique partnership, but it’s also an opportunity for how to look and build for the future.”
While the GST is already changing the calculus for rental developers, Cooper says there are other things the federal government can do to help incentivize purpose-built rentals. This includes simplifying the CMHC approval process, providing other tax incentives and helping access cheaper financing.
Prime Minister Justin Trudeau’s government has promised to unveil more measures aimed at increasing the country’s housing stock, with all eyes on next fall’s budget update.
According to the CMHC, the country needs to build about 3.5 million additional units over the current construction pace by 2030 to restore affordability.
Cooper says he’s glad to see a more robust debate happening in the country about housing, but suggests the crisis is a result of all parties and levels of government not doing enough over the past 40 years.
“We’re all to blame. But I’m really glad to see everyone stepping up and getting to grips with trying to find solutions now.”
This report by The Canadian Press was first published Sept. 26, 2023.