Page 1

OCTOBER 2021

Opportunities and risks from the renewed Liberal government By John Dickie, CFAA President

The September 20 federal election made hardly any change in the dynamics of governing Canada. As before the election, the natural “partners” are the Liberals and the NDP. As before the election, the Liberals can win a confidence vote if any one of the three main opposition parties votes with them, or even abstains. Table 1 shows the election result by region as reported at October 16. One or two seats might still change hands due to judicial recounts. Table 1: Seats won - 2021 Federal General Election Party Canada Atlantic Quebec Ontario Liberals Conservatives Bloc NDP Green Total

160 119 32 25 2 338

24 8

32

35 10 32 1 78

MB, SK & AB

BC & Territories.

78 37

6 51

17 13

5 1 121

5

14 1 45

62

Source: https://www.theglobeandmail.com/politics/federal-election/2021results/ October 16, 2021 As is often noted in the media, the popularity of the parties varies substantially by region. The Liberals tend to win in Atlantic Canada, and Ontario, while they are in a three-way fight in Quebec and BC, and the Conservatives dominate in Saskatchewan and Alberta. In addition, there is a pronounced urban-rural split to party preferences. In Ontario, the Liberals won 46 out of 50 seats in the Greater Toronto Area, leaving the Conservatives with four suburban seats and the NDP with no seats at all. In Ontario outside the GTA, the Liberals and Conservatives were in a virtual tie with 33 seats for the Conservatives, and 32 seats for the Liberals (while the NDP won five, and the Greens one). Even then, the seats in the cities went heavily for the Liberals, who won all of the seats in Mississauga, Oakville and Burlington, seven out of eight seats in Ottawa, four out of five in Waterloo/Kitchener/Guelph, three out of five in Hamilton, two out of three in London, and the sole seat in Kingston. In the West as well, the Liberals won their seats in the cities, with four seats out of eight in Winnipeg, one seat in each of Edmonton and Calgary and 15 seats in Greater Vancouver and its surrounding areas. Their reliance on the urban seats is one reason why the federal Liberals often seek to match or go further than the NDP on tenant issues, even though most tenant issues fall under provincial jurisdiction. Despite the parties’ seat counts being virtually unchanged, the election means that the government can potentially continue for four more years rather than the two years the last Parliament still had to run before the election. In addition, the focus has changed on various issues, including housing, tax and energy measures that may impact on rental housing.

rentalhousingbusiness.ca | 35


NATIONAL OUTLOOK Home ownership issues Housing affordability was a major focus of the campaign, largely in the owner occupation space. The Liberals promised a long list of changes mostly aimed at helping first time home buyers. The Liberals’ promises included: • Programs to encourage rent-to-own arrangements. • Forcing CMHC to cut mortgage insurance rates for first time home buyers by 25% - saving the average homeowner $6,100 over their mortgage term. • A new First Home Savings Accounts for savings for a down-payment of up to $40,000 – tax free on deposit, withdrawal and on the future sale of the home. • Doubling the first-time homebuyers credit from $5,000 to $10,000. These measures would deliver additional tax and mortgage preferences to first time homeowners, when homeowners are already heavily favoured over renters. For fairness to renters, CFAA believes the money put into the First Home Savings Account should be taken into income when the first house is sold. The Liberals also promised an assortment of measures aimed at curbing speculation in housing. These include: • “an anti-flipping tax” on residential properties, requiring properties to be held for at least 12 months, apart from certain exceptions, such as needing to move to take a new job or a family breakdown; • banning “new foreign ownership of Canadian houses” for the next two years; and • expanding the upcoming tax on vacant housing owned by non-resident, non-Canadians “to include foreign-owned vacant land within large urban areas”. Since the NDP would support many of those measures, we can expect to see many of the Liberals’ promises implemented, possibly in stages, and with some tweaks.

Rental housing issues The Liberals also promised to spend $4B over five years to help major municipalities speed up planning approvals, and provide offsets for inclusionary zoning requirements. As well as being positive for rental housing development, this could reduce the excess pressure on the housing markets to some degree. CMHC’s Rental Construction Financing Initiative will likely continue, with the funding and rules as announced over the last few years. Social housing advocates are arguing that the RCFI is not well targeted because the rent level that counts as affordable is too high. From a policy perspective, CFAA is concerned that the rent qualifying as affordable is too low in Toronto, Montreal and Vancouver, while it is higher elsewhere, which is the opposite of what is needed to create mid-market rental housing in the major centres.

Immigration To catch up on the immigrants Canada did not receive because of the pandemic restrictions, immigration is likely to be increased to 400,000 to 425,000 people per year for three years. Lots of immigration makes for lots of rental demand, but it would be better if the three orders of government solved the issues of delays in housing development before increasing immigration.

The Liberals also promised to continue with the National Housing Strategy (NHS), which is set to assist with the renewal and construction of 150,000 affordable homes, split roughly 3/4 to renewal and 1/4 to new community housing construction. Money may also flow to enable non-profit housing entities to buy existing affordable housing in order to keep it affordable for renters.

Tax issues Both the Liberals and the NDP promised to waive all GST on the construction of new affordable housing units. However, it is not clear if that relief will extend beyond social, community or non-profit housing, to include any new private market rental housing. CFAA would like to see that tax reform apply to most or all new private market rental housing.

rentalhousingbusiness.ca | 37


OCTOBER 2021

A year or two ago, the then Liberal Parliamentary Secretary for Housing Adam Vaughan raised the idea of taxing capital gains on principal residences as an issue, while saying he was opposed to it. He set off a political fire-storm by saying even that much. CMHC commissioned a Housing Solutions Lab to study that question. (The Lab is likely to recommend a federal property tax on the value of homes over $1M rather than a capital gains tax. That will avoid giving a free pass to people who bought before the recent run up of house prices.) CFAA will watch carefully for the recommendations of the Housing Solution Labs, and if applicable, advocate about what is done with them. The Liberals’ election platform speaks of reviewing the tax treatment of large corporate owners of residential properties such as REITs, “who are increasingly trying to amass large portfolios of Canadian rental housing, putting upward pressure on rents.” That presumably refers to the U.S REIT that wanted to buy up single family homes and rent them out. The Liberals also said they will bring in policies to curb excessive profits in this area, while protecting small independent landlords. The key point to note is that the promise is for a review. Promises for a review, or vague, unworkable promises that impinge on provincial jurisdiction are the kind of federal election promises which are often not implemented. REIT investors already pay taxes at their personal marginal tax rate, which can often be very high. As a result, a fair review should not lead to problematic changes in the tax rules for REITs.

Interest Deductibility Limitation The details of a new rule limiting the amount of interest payments which can be deducted by various businesses are still to be worked out. Details can be found at page 35 of the July/August 2021 issue of RHB Magazine. The main goal of the new rule is to prevent multi-national corporate groups from shifting profits to reduce the total taxes they pay. Hardly any rental providers operate in other countries, but rental providers could be side-swiped by a new rule. CFAA and REALPAC are coordinating our work in reaching out to the government to seek to avoid problems for the rental housing industry.

Energy issues Under the Paris Accord, Canada’s commitment is to reduce Greenhouse Gas (GHG) emissions by 30% of 2005 levels by 2030. A recent international report has called for that to be increased to 45%. The Liberals’ campaign promise is to reduce emissions by 40 to 45%. As part of their plan to achieve that, the Liberals plan to increase the carbon tax from $40 per tonne to $170 per tonne by 2030, which will significantly raise the cost of natural gas and fuel oil. Through the National Research Council, the government is working on a new retrofit code, addressing retrofit requirements. The Liberals promise to have that code in place by 2025. The Liberals set 2030 as the goal for all new buildings to be “net-zero energy ready”. (In practical terms, that means all new low-rise buildings would need to be built with roofs strong enough to take solar panels, but some may not have the solar panels installed.) To achieve those major GHG emissions reductions in rental housing, what is needed is major building retrofits. To heat buildings with electricity (either through resistance heating or heat pumps), buildings need to be made much better insulated and much more airtight. That means mechanical ventilation must be added, along with insulation and air sealing. With current technology and electricity costs, the necessary retrofits are cost-prohibitive. The Liberals also promised to create a pan-Canadian electricity Grid Council, and clean electricity standard, to reach net-zero emission by 2035. That will be particularly onerous for Alberta and Saskatchewan, which currently burn coal to create electricity, and for Nova Scotia, which burns coal, coke and oil-based fuel. All of those fuels emit GHGs, whereas hydro power does not.

38 | October 2021


NATIONAL OUTLOOK The Liberals also promised to implement a border “carbon adjustment” on imports from export areas without a carbon price. CFAA agrees. If imports were recognized with regards to their carbon emissions impact they bring into Canada, that will show a more accurate picture of proportion of Canadian GHG emissions from the housing sector, and the rental housing sector. The rental housing industry needs better and cheaper retrofit and heat capture technology, cheaper (and sometimes cleaner) electricity, and/or substantial government incentives to pay part of the costs of the necessary retrofits. The cost will be massive. CFAA is aware of the problem, and is working with the federal government to address it.

Conclusion As this goes to print, Prime Minister Trudeau has not announced his new cabinet, except for stating that he will be leaving Chrystia Freeland in place as Deputy Prime Minister and Finance Minister. To some degree, the government’s priorities on rental housing issues may change depending on the views of the new Minister responsible for Housing. Other ministers may also make life easier or more difficult for advocacy for rental housing providers. For updates on the new ministers, and other issues, watch CFAA’s website or e-mail us at admin@cfaafcapi.org to subscribe to CFAA’s free e-Newsletter.

Justin Trudeau, Prime Minister of Canada

Chrystia Freeland Deputy Prime Minister / Minister of Finance of Canada

Save the dates for the CFAA Rental Housing Conference 2022 Registration will soon be open for CFAA-RHC 2022, which will take place from May 9 to 11 at the Hyatt Regency Hotel at 370 King Street in downtown Toronto, where CFAA held its conference in 2019. CFAA-RHC 2022 will feature two days of timely and relevant education sessions, Benjamin Tal’s informative and entertaining Economic Update, the Building Innovations Tour, CFAA’s 7th annual Rental Housing Awards Dinner, and more!

Benjamin Tal, Deputy Chief Economist, CIBC World Markets

Don’t miss out on CFAA’s early bird pricing! For more information, or to register, visit www.CFAA-RHC.ca, or email events@cfaa-fcapi.org. Also plan to join CFAA in Halifax in June 2023!

WANT TO STAY UP TO DATE WITH NATIONAL OUTLOOK? Sign-up for CFAA’s National Outlook e-newsletter to receive up-to-date news on what is happening across Canada, as well as industry insights and insider information on CFAA happenings. Email communication@cfaa-fcapi.org to start receiving CFAA’s e-Newsletter today!

rentalhousingbusiness.ca | 39

rentalhousingbusiness.ca | |39 39 rentalhousingbusiness.ca


OCTOBER 2021

CFAA Awards Program 2022 – Get ready to apply

CFAA is pleased to announce that the 7th annual CFAA Rental Housing Awards Program will be open for applications early in 2022. The awards winners will be announced at the CFAA Awards Dinner on May 10, 2022, at CFAA-RHC in Toronto. Winners will also be acknowledged through CFAA’s communications, website and Twitter, and a trophy.

Awards CFAA is offering 10 awards categories in 2022. CFAA Suppliers Council members, direct landlord members and landlord affiliate members (landlord members of one of CFAA’s 12 member associations) are invited to apply for these awards: FOR RENTAL HOUSING PROVIDERS • CFAA Landlord Member of the Year • Property Manager of the Year • Off-Site Employee of the Year • On-Site Employee of the Year • Marketing Program Excellence of the Year • Renovation of the Year • Rental Development of the Year FOR RENTAL HOUSING SUPPLIERS • New Product or Service of the Year • CFAA Suppliers Council Member of the Year FOR MEMBER ASSOCIATIONS • Association Achievement of the Year As in past years, judging for a number of the awards categories will likely be split by company size, exact job, or other characteristics, so that CFAA can recognize more worthy rental housing providers and suppliers in the CFAA Awards. Please plan to enter the CFAA Awards, or consider volunteering your time, or sponsoring components of the awards program. Help CFAA celebrate excellence in the rental housing industry! For more information about membership, eligibility to apply for an award, or becoming a awards judge or sponsor, visit www.cfaa-fcapi.org or email admin@cfaa-fcapi.org.

Rental Housing Employee Compensation Survey now available Find out how your wages, salaries and benefits compare with your competitors’. The CFAA Rental Housing Employee Compensation Survey reports for 2021 are now available for 6 regions or CMAs across Canada, namely Eastern Canada, the Greater Toronto Area (GTA), Ottawa, Ontario other than the GTA and Ottawa, Edmonton and the West other than Edmonton.

Prepared by Steven Osiel, a professional compensation consultant who has worked in rental housing for more than 15 years, the survey reports on the average and range of compensation for both building-based and head office positions. Most reports present actual city data for building superintendents (aka resident managers), cleaners, leasing agents, maintenance technicians, property administrators and property managers. Three other building-based positions, and 21 head office positions, are primarily addressed with Canadawide or region-wide data, and statistical estimates for each region or city. (A substantial amount of actual head office data is available for Ontario or Toronto, since so many head offices are located there.)

40 | October 2021


NATIONAL OUTLOOK In total, the survey reports on the earnings of almost 5,000 rental housing employees in 30 occupations, specific to rental housing. An optional survey component addresses HR and benefits information, including average turnover rates, benefits programs, hours of work, vacation and sick leave entitlements, COVID-19 related benefits and much more. Much of that data is split between large rental housing providers and mid-sized providers so that survey users can compare their programs with those of their peers.

Survey purchases include a one hour recorded presentation by Steven Osiel on how to use the survey to improve your company’s compensation and benefits decisions.

This is the one and only compensation survey specific to rental housing in Canada, using rental housing position descriptions, and reporting on rental housing employees, rather than a mix of employees including commercial office building operators. Even if you buy another survey, you should buy the CFAA survey to get the data on rental housing specifically. CFAA’s survey pricing is competitive, and all net proceeds go to fund CFAA’s government relations work to protect the rental housing industry. For more information and pricing, see the compensation survey section of the CFAA website at www.cfaafcapi.org. Order the CFAA Rental Housing Compensation Survey for your city or area now, and improve your compensation and benefits policies!

CFAA Rental Housing Compensation Survey 2021 Canada’s only compensation and benefits survey specific to rental housing is now available for purchase. For six regions or major cities covering Canada, find out the average and full range of compensation for nine building-based positions and 21 head office positions. Find out about changes the rental housing industry is making in working-from-home policies, and the plans for removing COVID-19 incentives.

MOBILE FRIENDLY

Visit www.cfaa-fcapi.org for more information.

rentalhousingbusiness.ca | 41