RHB Magazine Nov/Dec 2021 - National Outlook

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NOV/DEC 2021

CFAA welcomes Ahmed Hussen as the reappointed Minister of Housing By John Dickie, CFAA President

Ahmed Hussen has been re-appointed the Minister responsible for Housing. However, his role has changed in the sense that he is now primarily focused on housing, while the new Minister of Families, Children, and Social Development, Karina Gould, has inherited other large files (including child care) formerly under Minister Hussen’s responsibility. Minister Hussen’s new title is the Minister of Housing and Diversity and Inclusion. He is responsible for Ahmend Hussen advancing the Liberal Government’s housing platform from the 2021 federal election, as well as for CMHC, homelessness programs and diversity and inclusion issues. Born in 1976, Minister Hussen left Somalia with his parents and older siblings to escape its civil war when he was 14, emigrating to Canada at age 16 to live with one of his brothers. Minister Hussen’s background includes organizing the social housing tenants in Toronto’s Regent Park, leading the Canadian Somali Congress, and acting as a lawyer in human rights law, immigration law and criminal law. Mr. Hussen was elected to Parliament in 2015, and represents YorkSouth-Weston in Toronto.

Continued federal support for portable housing benefits Contrary to the concerns of some in the rental industry, Minister Hussen says he supports expanding the Canada Housing Benefit. At a recent meeting with CFAA and other housing advocacy groups, Minister Hussen said: “I support the expansion of portable housing benefits. The Federal government is willing to expand the Canada Housing Benefit, but needs provincial buy-in for their 50% [cost share].” In some locations, municipal money would presumably serve. For example, the City of Ottawa now funds over 1,000 housing benefits itself (with 100% municipal dollars), and is adding about 200 more each year. CFAA’s Ottawa affiliate, the Eastern Ontario Landlord Organization, may want to lobby for the City of Ottawa to tie its money to the federal money, to pay for 300 to 400 more PHBs in Ottawa each year. Each provincial or City-based association could see if they want to advocate for more PHBs from their province using 50 cent dollars, and tying in with the federal program. CFAA is happy to assist with that work, providing material, and support for submissions, or lobbying on that issue.

The new Liberal interest in housing affordability Before the 2021 election, the federal Liberals had focused on the housing needs of low-income households. It was said (accurately) that the National Housing Strategy was really a low-income housing strategy. The Liberals spoke about housing affordability more broadly, but they had few policies to address the broader issues.

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NATIONAL OUTLOOK In the Summer of 2021, the heightened national attention placed on housing affordability for the middle class led the Liberals to decide that they need policies which address that issue, as well as low-income housing. Within the middle class, the people most affected are young people who have not yet achieved home ownership and want to. The Liberals are also concerned about home ownership for new immigrants and other disadvantaged groups who do not have access to intergenerational wealth to afford to buy a home. Obviously, the Liberals want policies which will be popular, but they also want to be seen to be trying to make good policies and to be able to show some success. The issues of concern for CFAA’s members have expanded, both because new market rental housing serves the middle class and those seeking to join it, and because there is more pressure for government to be seen to be making effective use of the money and regulatory power it can apply to housing issues.

The Throne Speech The Throne Speech was delivered by Governor General Simon on November 23. At a high level, the Throne Speech states the priorities of the government. Along with child-care, housing was positioned as a key element in responding to the rising cost of living, and a centrepiece of the newly elected Liberal Government’s agenda. (Pharma-care is not on the government’s current agenda.) Through the Governor General, the government said: “Whether it is building more units per year, increasing affordable housing, or ending chronic homelessness, the Government is committed to working with its partners to get real results. For example, the Housing Accelerator Fund will help municipalities build more and better, faster.

Mary Simon

The Government will also help families buy their first home sooner with a more flexible First-Time Home Buyer’s Incentive, a new Rent-to-Own program, and by reducing the closing costs for first-time buyers”. The focus is on helping more people buy their first home sooner than they can now, by: • •

supporting saving for the down-payment (or providing a substitute through the First-Time Home Buyer’s Incentive), providing a greater ability to carry the cost of a home through a lower mortgage payment, and

making more new homes available to buy.

There will soon be one new federal program and one set of programs which are key to federal efforts to make more homes available for people to buy: the Housing Accelerator Fund and the federal infrastructure programs. Each will be discussed below.

The Housing Accelerator Fund In its 2021 election platform, the federal Liberal Party promised the following: “Help Cities Accelerate Housing Construction Overly complex, backlogged, and under-resourced municipal zoning and permitting systems are slowing the pace of building much-needed homes. A re-elected Liberal government will: Invest $4 billion in a new Housing Accelerator Fund which will grow the annual housing supply in the country’s largest cities every year, creating a target of 100,000 new middle-class homes by 2024-25. This application-based fund will offer support to municipalities that: • • • •

grow housing supply faster than their historical average; increase densification; speed-up approval times; tackle NIMBYism and establish inclusionary zoning bylaws; and encourage public transit-oriented development.

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This fund will support a wide range of eligible municipal investments, including red tape reduction efforts, and reward cities and communities that build more homes, faster. • •

Help speed up the time it takes to build more homes by investing in e-permitting technology and help communities streamline the planning process. Work with municipalities to identify vacant or underused property that should be converted to housing on the principle of use it or lose it.”

The idea for the Accelerator Fund apparently came largely from the Canada-BC Expert Panel on the Future of Housing Supply and Affordability, which issued its final report on June 17, 2021. CMHC provided the Secretariat service for that Panel. The Expert Panel was of the view that some municipalities are unwilling to approve much new development, since they are dominated by anti-growth views or NIMBYism. The Panel made recommendations for approaches a province can use to encourage or mandate more approvals and more timely approvals. However, in addition, the Expert Panel considered that many municipalities would approve more development more quickly than they are doing now, but they lack the resources or the systems to do that. The Panel recommended steps be taken to assist municipalities with resources. Those resources could include funding for consultants’ work on red tape reduction, more or better technology, staff training, staff re-allocation, better project management, better implementation plans, and other steps, to make the approval processes for new housing proceed more quickly, both in the short term and in the long term.

Possible issues with the Accelerator Fund Notice that the Fund is directed at market housing. Faster approvals would also help social and community housing development, but they are not the targets of the Fund. However, CFAA already sees signs that non-profit advocacy groups will try to target the Fund to provide extra help or priority for their projects, even though there are many other programs to support those projects. Notice also the frequent use of the word “homes”. There is a consistent preference in much Canada’s housing policy toward encouraging home ownership, rather than renting. That was not the view of the Expert Panel (which considered rental housing development every bit as important as other housing development), but the rental industry will need to work to keep the Fund “tenure neutral” and to keep improving the processing of applications for rental developments as a key goal of the Fund. Another source of trouble might be the “tip of the hat” to inclusionary zoning (IZ). Unless it is done really well, IZ can easily be the final straw that makes rental development uneconomic even in today’s lowinterest rate environment. One way to make IZ work is for government to provide offsets to the increased costs IZ imposes. The Housing Accelerator Fund could potentially be used to pay for those offsets, or it could be used to fund the waiver or reduction of development charges, community amenity charges or similar charges. The Liberal Party fiscal plan called for the spending of $750M in federal fiscal year 2022-23, and $1.625B in 2023-24 and 2024-25 respectively, making a total of $4B available for the Accelerator Fund over those three years. Half of that could offset municipal charges of $50,000 per home for 40,000 homes, whether for rental or for owner-occupation. CFAA is working on those issues.

The Federal Infrastructure Programs – “Good housing policies”

Each year the federal government contributes billions of dollars to provinces and municipalities to fund new infrastructure such as transit lines, roads and bridges. Minister Hussen and others have made it clear that, from now on, the federal government will make the provision of federal infrastructure funding conditional on the provinces and municipalities having “good housing policies.”

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NATIONAL OUTLOOK While that sounds good in principle, what makes a good housing policy depends largely on the views of the person assessing the policy. At this point, the government means housing plans that encourage growth in housing development: more housing, denser housing and faster housing. Most people are in favour of high density around transit stations, and indeed, market forces tend to deliver that, provided the municipalities do not block it. However, CFAA is concerned that housing advocates who do not support the delivery of housing by the free market will seek to change what is meant by “good housing policies” to what we in the rental industry would call bad housing policies. For example, it would be a disaster if the definition of a “good housing policy” included tight rent control. As an industry, we need to push back hard against that or similar changes. Other tensions will arise in policy areas like Inclusionary Zoning. Housing experts are divided on the value of Inclusionary Zoning, but the majority view now seems to be that IZ can work if it is designed correctly, but it is counter-productive if it is designed badly. There is agreement that if IZ reduces development, then few affordable units are produced, along with few market rent units, which is counter-productive for making housing more affordable. To avoid reducing development, IZ needs to be imposed only when ample density is available or is added as compensation for the IZ requirement, and the IZ requirement needs to be modest, both in the amount of rent (or price) reduction, and in the proportion of affordable units which must be provided. CFAA, and all of Canada’s apartment associations, need to be alert to all governments’ decisions about what constitutes “good housing policy”.

Other policy areas affecting rental housing

Despite the flurry of new activity on housing issues, other issues remain important for rental housing providers and CFAA.

Energy Energy issues are at the forefront of public policy, including suggestions that homeowners and rental housing providers be forced to reduce greenhouse gas (GHG) emissions by changing from heating buildings with fuel oil or natural gas, to heating with electricity instead. Heat pumps are generally a more efficient electrical heating method than baseboards using resistance heat, because heat pumps move heat into homes, rather than generating heat. There are two kinds: •

Air source heat pumps, which draw heat from the air, and

Ground source heat pumps, which draw heat from the ground.

Ground source heat pumps are sometimes referred to as geo-exchange or geothermal heat pumps. They have a high capital cost because pipes need to be installed underground. They also need land under which to install the pipes; and so, they may not be feasible in dense urban settings, where many rental buildings are located. Heat pumps tend to produce a lower temperature heat than burning fossil fuels, or resistance heating, and therefore they don’t heat a building as quickly. That means to use a heat pump, a building needs to be

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!

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NOV/DEC 2021 airtight and well insulated to keep the heat from escaping, and to reduce the “heating load”. That is a major factor in the cost of deep retrofits to make the use of heat pumps practical in Canada’s colder areas. CFAA is increasing our efforts to minimize the negative impact of energy moves at the federal level, including seeking to increase access to incentives for rental housing providers. Provincial and municipal policies and rules are generally issues for the various provincial and regional associations, but CFAA seeks to facilitate information exchange on such nation-wide issues, for the benefit of rental housing providers across Canada.

Interest Deductibility Limitation (IDL) The 2021 Budget included a provision that there will be a limitation on the interest that can be deducted by many businesses in Canada, based on 30 per cent of their earnings before interest, taxes, depreciation and amortization (EBITDA). However, the legislation to bring that into effect is still to be introduced. The purpose of the new rule is to prevent “base erosion and tax shifting” (BETS) by which international corporate groups sometimes move income to jurisdictions with low tax rates. There is expected to be an exemption for businesses with taxable capital of less than $15 million. As well, CFAA and other real estate associations are seeking an exemption for real estate, as there is in the United States. All real estate is capital intensive, and an interest deductibility limitation (IDL) would force a major revision to the ways real estate investment are financed, effectively raising the cost structure by effectively making owners substitute (high cost) equity for low-cost financing. That would be detrimental to all real estate sectors. It would be particularly contrary to public policy if an IDL were applied to rental housing, since the government wants housing to become more affordable, and making housing more costly would tend to make it less affordable.

REGISTER NOW for CFAA Rental Housing Conference 2022 Early registration is open now 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 6th annual Rental Housing Awards Dinner, and more! Don’t miss out on CFAA’s early bird pricing! For more information, or to register, visit www.CFAA-FCAPI. org, or email events@cfaa-fcapi.org.

CFAA Awards Program 2022 – Get ready to apply

CFAA is pleased to announce that the 7th annual CFAA Rental Housing Awards Program is open for applications. The awards winners will be announced at the CFAA Awards Dinner on May 10, 2022, at CFAARHC 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:

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NATIONAL OUTLOOK FOR RENTAL HOUSING PROVIDERS • CFAA Rental Housing Provider 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.

CFAA Rental Housing Compensation Survey 2021


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