The impact of Canada’s rental housing industry on the economy
According to a new KPMG report just released by the Canadian Federation of Apartment Associations (CFAA), Canada’s rental housing industry contributed almost $70 billion to Canada’s GDP in 2015, while supporting 435,000 jobs and generating almost $26 billion in tax revenues to governments.
Gross domestic product According to the Organisation for Economic Co-operation and Development (OECD), gross domestic product (GDP) is an aggregate measure of production. It measures the monetary value of final goods and services purchased by the end users that are produced in a country, state or province within a given time period. A country’s total GDP can be subdivided into the contribution of different sectors or industries. The GDP generated by Canada’s rental housing industry refers to the “value-added” output from providing and producing rental homes and related services, which includes the added value generated in the rest of the economy. In 2015, the rental industry's GDP contribution totalled $69.3 billion, which is more than the mining and aerospace industries contribute to Canada’s economy.
Infrastructure investment In 2015, more than $20.6 billion was put into Canada’s
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infrastructure through investment in rental housing. This included $12.3 billion for new rental construction expenditures and $8.3 billion in capitalized renovations. Approximately two-thirds of Canada’s rental stock (about 2,420,000 homes) was built before 1981. Being at least 35 years old, these homes require significant investments in capital upgrades. The private sector organizes and finances these types of renovations, which means that the government and taxpayers pay very little of these expenses, while receiving substantial tax revenues.
Employment and labour income The private sector rental housing industry employs more than 435,000 full-time positions across Canada. This produces $30.6 billion in labour income, which includes wages and employer-paid contributions. Many positions are well-paying jobs. The average annual earnings and benefits of a person employed full-time in the rental housing sector and its supply chain is $70,154. The industry employs people across different sectors, including construction workers, architects, engineers, tradespeople and other trades involved in constructing or renovating rental housing. It also includes jobs traditionally associated with rental housing, such as property managers, leasing agents and superintendents.
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Many Canadians are unaware of how important rental housing is to the economy, and for creating good, well-paying jobs. Better public policy would lead to even more benefits for the economy, — JOHN DICKIE for jobs and for those who rent their housing.
Taxes and government revenue The private sector rental housing industry generates more than $25.8 billion in total tax revenues to all levels of government including sales taxes, property taxes and income taxes. The contribution to government revenue includes more than $9 billion paid to municipalities, mostly in property taxes; more than $5 billion paid to the provinces; and more than $7.6 billion paid to the federal government in taxes on labour income and rental income, and in CPP and EI contributions. In releasing the report, CFAA President John Dickie said, “Many Canadians are unaware of how important rental housing is to the economy, and for creating good, wellpaying jobs. Better public policy would lead to even more benefits for the economy, for jobs and for those who rent their housing.”
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• Loosen or remove rent controls. Rent control reduces investment in the capital repairs of existing rental properties, as well as new construction. Rent control also interferes with efficient allocation of the available rental supply in tight rental markets. • Reduce or defer capital gains tax. Less (or deferred) tax lowers the cost of rental housing and makes rent levels more affordable. Deferring tax on capital gains would promote more environmentally friendly urban redevelopment, allow owner managers to relocate, reduce the incidence of absentee landlords, and benefit small investors and middle-class families. To read the full KPMG report, or learn more, visit www.cfaa-fcapi.org. A breakdown by province will be reported in The Annual, to be published in February 2017.
Supporting the rental housing industry The evidence demonstrates that the private sector rental housing industry contributes significantly to Canada’s GDP, drives investment in infrastructure, creates jobs and produces substantial tax revenues. Reforming public policy to support Canada’s rental housing industry would produce even greater returns for the economy. According to CFAA, the government should take the following actions: • Attach rental subsidies to low-income people, not the physical buildings. Expanding portable housing benefits will provide more housing choices for low-income Canadians, which will assist them with taking jobs more easily or meeting family needs.
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• Provide better incentives to build private sector rental housing. Allow for-profit developers to make use of incentives to build affordable units in mixed-income communities. • Reduce the amount of red tape to get approvals for new rental construction. It can take five to six years to develop a rental property (when it used to take two to three years), which leads to higher costs and rents at the end of the project, as well as less overall construction.
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