Parties spar over housing after government tables bill to waive GST on new rental construction

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Government and opposition MPs sparred in Parliament over the best way to boost Canada’s housing supply after the Liberals tabled a bill to waive the GST on new rental construction.

Finance Minister and Deputy Prime Minister Chrystia Freeland introduced Bill C-56 Thursday morning, which the government is calling the Affordable Housing and Groceries Act. The legislation provides new details on a package of policies that Prime Minister Justin Trudeau first announced last week at a Liberal caucus retreat in London, Ont., including updates to competition laws.

The price of housing and groceries is a pressing concern for voters because of high inflation and all parties are trying to position themselves as having the best policies to reduce cost-of-living pressures.

Ms. Freeland, Innovation Minister François-Philippe Champagne, Housing Minister Sean Fraser and other ministers said at a news conference that the legislation would lead to more housing and less anti-competitive behaviour by companies, including those in the grocery sector.

“This is a historic change for Canada,” said Ms. Freeland, with respect to changes aimed at making it more challenging for major companies to proceed with mergers.

The government introduced the bill one day after Conservative Leader Pierre Poilievre tabled a housing bill of his own. The Conservatives say they would also remove the GST from new rental construction, but only when the average rent on the property is below market rate. The NDP, meanwhile, said the government should also focus on non-profit and co-op housing to help those most in need.

During Question Period, Mr. Fraser said the Conservative approach to the GST rebate is narrower and would build fewer homes.

“We have advanced a measure that would get rid of the GST on apartment construction. He has now made a commitment to put it back on for middle-class homes,” Mr. Fraser said.

However, Mr. Poilievre criticized the Liberal plan, saying it fails to ensure the tax breaks don’t go to building high-cost rentals for the wealthy.

“What my plan on GST would do is make sure we do not give tax breaks for $10-million penthouse apartments, like that member is proposing to do,” Mr. Poilievre said in response to Mr. Fraser.

“We want the builders who qualify for it to have affordable apartment rentals so that Canadians could actually live in them. God forbid, the limousine Liberals want all the money to go to the penthouse apartments,” he said.

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NDP MP Lindsay Mathyssen said in the House that her party has long called for the GST to be waived for new apartments, but Thursday’s bill falls short.

“The Liberal plan does nothing to stop profiteering landlords from throwing people onto the street,” she said.

Rob Gillezeau, assistant professor of economic analysis and policy at the University of Toronto, said the Liberal plan falls well short of addressing Canada’s housing problem.

“It seems like this was a last-minute panicked move,” Dr. Gillezeau, who previously worked for the NDP, told The Globe. He noted that the bill only has one measure to address housing, which will lead to a marginal improvement in supply.

“The policy impact is way too small, given the scale of the problem,” he said. “It’s a meaningful move. But you would need many, many more policy changes at this level or larger to really start to shift the dial on housing.”

The Liberals promised to waive the GST on rental housing in their 2015 platform but abandoned the pledge two years later, before reviving it last week.

Builders have said that with current high interest rates, a sales-tax break could make the difference in deciding to go ahead with a residential project.

The definition of purpose-built rental housing will be detailed later through regulations. A Finance Department document released last week said qualifying new residential units would be defined as buildings with at least four private apartment units or at least 10 private rooms or suites. Also, 90 per cent of residential units must be designated as long-term rental.

The legislation is just six pages, plus a cover and summary page. It covers the GST rebate and three competition-related changes.

They create a framework for the Industry Minister to direct the Competition Commissioner to conduct an inquiry into the state of competition in a market or industry; allow the Competition Tribunal to make certain orders related to anti-competitive behaviours and aim to make mergers more difficult by removing a provision that allows companies to argue a merger is warranted because it will create efficiency gains.

Navin Joneja, co-chair of the Blakes law firm’s competition, antitrust and foreign investment group, reviewed the competition sections of the legislation and said it is not immediately clear what would change for consumers. He said the efficiency gains provision of the existing law is not often used.

“It’s a fair question as to whether this will actually lead to lower prices for consumers,” he said in an interview.

Trevor Neiman, vice-president of policy and legal counsel for the Business Council of Canada, said the competition measures in the bill will actually harm competition and consumers.

In a statement, Mr. Neiman said the council is “deeply concerned” by the government’s overhaul of the Competition Act without meaningful consultation.

Mr. Neiman said changes to the Competition Act can have wide-ranging consequences and should be the subject of in-depth consultations.