The September Throne Speech – what does it mean for rental housing providers? By John Dickie, CFAA President
On Wednesday, September 23, Governor General Julie Payette delivered the Throne Speech, stating the Liberal government’s vision for the remainder of 2020 and into the winter of 2021. This article will provide a short overview and then discuss the issues which have the most impact on rental housing. However, relatively little attention was paid to for-profit rental housing, or indeed to any rental housing. Items which could impact the rental Julie Payette housing sector would mostly do so indirectly, apart from the tax changes, which were not aimed at rental housing, and should have little effect on rental housing. That is discussed at fiscal sustainability, below.
The four foundations The four broad goals stated in the Throne Speech are the following: 1. fighting the pandemic and saving lives. 2. supporting people and businesses through this crisis as long as it lasts, whatever it takes. 3. building back better, creating a stronger, more resilient Canada, by “strengthening the middle class and helping people working hard to join it, and continuing to create jobs and build long-term competitiveness with clean growth”, and 4. standing up for who we are as Canadians, including fighting racism.
Supporting people and businesses through this crisis Supporting people The Government will launch a campaign to create over one million jobs, restoring employment to previous levels. This will be done by using a range of tools, including: • direct investments in the social sector and infrastructure, • immediate training to quickly skill up workers, and • incentives for employers to hire and retain workers, including extending the Canada Emergency Wage Subsidy (CEWS) right through to next summer. The government had earlier announced that, at the end of September, it would bring in the Canada Relief Benefit (CRB) providing $400 per week instead of the $500 provided by the Canada Emergency Relief Benefit (CERB). The Throne Speech repeated that promise. However, in the negotiations in which the Government sought to gain the support of the NDP on the confidence vote on the Throne Speech, the NDP demanded an increase in the
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NATIONAL OUTLOOK amount to the $500 per week previously provided. The Government agreed, and that and other changes appear to have gained the NDP’s support. While potentially making workers less easy to hire, that change will help low-income people pay their rents. Supporting businesses This Fall, in addition to extending the wage subsidy program, the Government will take further steps to bridge vulnerable businesses to the other side of the pandemic by: • Expanding the Canada Emergency Business Account (CEBA) to help businesses with fixed costs; • Improving the Business Credit Availability Program; • Introducing further support for industries that have been the hardest hit, including travel and tourism, hospitality, and cultural industries like the performing arts. Fiscal sustainability The Government also said it will identify additional ways to tax extreme wealth inequality, including limiting the stock option deduction for wealthy individuals at large, established corporations, and addressing corporate tax avoidance by digital giants. CFAA is pleased that there was no reference to resurrecting the Interest Deductibility Limitation, proposed early this year, and no specific reference to any review of capital gains taxes. Those are the tax measures that would hit rental housing hard, and CFAA alerted the Government to the negative effects both issues would have on rental housing supply and affordability. Later this Fall, the Government will release an update to Canada’s COVID-19 Economic Response Plan, with costing. That will likely be similar to the usual Fall Economic Statement, even if delivered in these unusual times.
Building back better to create a stronger, more resilient Canada Addressing gaps in our social systems The Government will bring in a new Canadian Disability Benefit modelled after the Guaranteed Income Supplement for seniors. That will help people with disabilities pay their rents. Despite the area being one of provincial jurisdiction, the Government will also support a national drug plan with those provinces which want to Rent arrears and rental losses move forward. That too could help low-income people pay their rents. By correlating the rent collection figures from our member-associations, CFAA The Government will add to the historic National Housing has concluded that about 200,000 tenant Strategy announced in 2017 by increasing investments to households are seriously in arrears of rent rapid housing in the short term, and partnering with not-foracross Canada, while between 10,000 and profits and co-ops in the mid- to long-term. It is note-worthy 20,000 small landlords are short more than that there is no reference to for-profit rental housing, and half of their gross rental income, which no reference to any enhancement of the Canada Housing means they are having to inject a great Benefit, which pays financial support directly to low-income deal of money every month to meet the renters. expenses on their rental units. Both groups There is also no reference to helping the provinces to are in very difficult straits, and both groups assist renters who have fallen into serious rental arrears could be helped at the same time by a situations due to COVID-19. The Government seems program to address tenant rent arrears and oblivious to the degree to which rents diverge across help tenants keep their housing. Canada and across most provinces. At $2,000 per month, CERB and CRB are more than adequate in Edmunston, N.B., or most of Quebec, where two bedroom apartments rent for $500 per month, but woefully inadequate in Toronto or Vancouver where such apartments rent for $1500 per month or more. For the middle class, the Government will also move forward with enhancements to the First-Time Home Buyer Incentive, including in Canada’s largest cities, so families can afford to buy their first home. While a
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OCTOBER 2020 potential vote getter, such a policy is difficult to bring in without inflating the prices of starter homes. That policy also has the potential to draw off better off renters, to the detriment of rental demand, when rental demand has already shrunk with the decrease in immigration, in non-permanent residents and in students living away from home, when the rental market is also impacted by the increase in supply due to shortterm rentals returning to the long-term rental market. A stronger workforce According to the Throne Speech, the government plans the largest investment in Canadian history in training for workers. That will include: • Supporting Canadians as they build new skills in growing sectors; and • Helping workers receive education and accreditation. Taking action on extreme risks from climate change Climate action will be a cornerstone of the Government’s plan to support and create a million jobs across the country. The Government will immediately bring forward a plan to exceed Canada’s 2030 climate goal. The Government will also legislate Canada’s goal of net-zero emissions by 2050. As part of its plan, the Government will: • Create thousands of jobs retrofitting homes and buildings, cutting energy costs for Canadian families and businesses; • Invest in reducing the impact of climate-related disasters, like floods and wildfires, to make communities safer and more resilient; and • Make zero-emissions vehicles more affordable, while investing in more charging stations across the country. CFAA will promote the inclusion of rental housing in the programs to encourage energy retrofits, and in the expansion of electric vehicle charging stations (to meet climate change targets).
Standing up for who we are as Canadians, including fighting racism Besides protecting both official languages and addressing indigenous issues, the Throne Speech says the Government will redouble its efforts to address systemic racism by: • Going further on economic empowerment for specific communities, and increasing diversity in procurement; and • Building a whole-of-federal-government approach around better collection of disaggregated data to understand differential outcomes for groups subject to discrimination. Apart from the Throne Speech, CFAA has learned that CMHC is working with Statistics Canada to gather and correlate statistics about the treatment of different racial groups within rental housing. Clearly, disadvantaged groups are over represented in rental housing. That suggests that most rental providers do not discriminate on the basis of race. Unfortunately, disadvantaged groups are also over represented in homelessness. They may also be over represented in terminations for non-payment of rent. Rental industry associations will have to be vigilant to ensure people realize that such an over representation is not due to discrimination by rental housing providers, but rather due to systemic issues around incomes and income stability (which are important to address on a society-wide basis). CFAA and our member-associations from coast to coast have long stood for compliance with the Human Rights Codes, and for good income support for low-income people so that they can afford to pay for the housing that they need. We may need to re-double our efforts to stand with low-income and racialized people, and to make sure that the rental housing industry is not side-swiped by the misinterpretation of statistics.
Conclusion The direction indicated by the Throne Speech allows for a sigh of relief within the rental housing industry. CFAA is very pleased that the Federal Government has listened to our warning of the immense damage
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NATIONAL OUTLOOK that would be caused to the rental housing sector if the Government were to carry through with an Interest Deductibility Limitation, or increases to capital gains taxes. These are issues that CFAA will continue to press upon the Federal Government. While it is true that the existing National Housing Strategy includes provision for $15 billion in loans for private rental construction under the RCFI program (over 10 years), it is disappointing that the Federal Government is apparently unwilling to address to the degree to which rents diverge across Canada and across most provinces, and unwilling to assist with the rental arrears problem faced by 200,000 private market renters, and 10,000 or 20,000 small landlords.
The First-Time Home Buyer Incentive – where is it going?
Rental demand comes from a variety of sources: there are people without the income or down-payment to buy a house, people who choose not to buy a house, people who think they may move soon (so that it does not make sense to buy a house). Renters come from all income groups and all age groups, but many renters are young people establishing separate households for the first time, or recent immigrants, or non-permanent residents staying in Canada for a limited period of time. Or they can be low-income people who are unlikely ever to afford a home apart from a program like Options for Homes. In most of Canada’s cities, an important part of the rental market is young people who expect to move from rental housing to their “first home”. In many centres across Canada, those moves are happening as they have for fifty years. However, in major centres, house prices are so high that many young people are “stuck” renting their homes. They may have the income to buy a house, but they lack the down-payment. In 2019, the Federal Government introduced a Shared Equity Mortgage (SEM) to help with that problem. In the Throne Speech presented on September 23, this year, the Government revealed its intention to enhance the SEM to help first time home buyers, especially in Canada’s largest cities. So that rental providers know the programs enticing some of their customers out of rental housing, here is CMHC’s description of the current First-Time Home Buyer Incentive, and some additional information. The First-Time Home Buyer Incentive helps qualified first-time homebuyers reduce their monthly mortgage payments without adding to their financial burdens. The Incentive is a shared-equity mortgage with the Government of Canada. It offers: • 5% or 10% for a first-time buyer’s purchase of a newly constructed home • 5% for a first-time buyer’s purchase of a resale (existing) home • 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home. Under the Incentive, the Government has a shared investment in the home. The Government shares in both the upside and downside of the property value. By using the Incentive, the borrower does not have to save as much of a down payment to be approved for their mortgage. The effect of the larger down payment is a smaller mortgage, and lower monthly costs.
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OCTOBER 2020 The homebuyer will have to repay the Incentive based on the property’s fair market value at the time of repayment. If a homebuyer received a 5% Incentive, they would repay 5% of the home’s value at repayment. If a homebuyer received a 10% Incentive, they would repay 10% of the home’s value at repayment. The homebuyer must repay the Incentive after 25 years, or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full any time before, without a pre-payment penalty. A person is considered a first-time homebuyer if: • they have never purchased a home before, • they did not occupy a home that they or their current spouse or common-law partner owned in the last 4 calendar years, OR • they have recently experienced the breakdown of a marriage or common-law partnership. A few additional criteria to qualify for the First-Time Home Buyer Incentive are these: • the total annual qualifying household income does not exceed $120,000 • the total borrowing is no more than 4 times the qualifying household income (i.e. a maximum of $480,000). The borrowing limit of $480,000 is a problem in Toronto and Vancouver, because that amount doesn’t buy much in those markets. Without providing any details, the Throne Speech suggests that limit will be raised in Toronto and Vancouver. However, it is unclear how far into the suburbs the increase will apply, whether the household income to qualify will also have to be higher, and whether the enhancements will apply in centres other than Toronto and Vancouver. Those will be important issues in determining what impacts an enhanced Home Buyer Incentive will have on rental demand. By the time you read this, more information is likely to be available from CMHC’s website, and from CFAA at www.cfaa-fcapi.org.
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NATIONAL OUTLOOK Upcoming CFAA webinars – key topics for rental housing providers By Andrea Wong, Client Service Representative, CFAA Due to COVID-19, CFAA cancelled Rental Housing Conference 2020. As a partial replacement, we conducted three webinars in May and June. In October and November, CFAA plans to host 6 webinars, to draw people together, share information, and to replace some of the funding lost due to the cancellation of the in-person conference. Yardi, Home Depot, Wyse Meter Solutions, HD Supply, CTI Canadian Tenant Inspection Services, Building Stack and other industry suppliers are being very supportive of the webinar program. CFAA thanks them for their support. Webinar topic Benjamin Tal’s Fall Economic Update Executive Roundtable
Scheduled date Tues, Oct 20 Tues, Oct 27
Operations Roundtable What you need to know about CMHC’s new mortgage insurance rules Technology Updates for COVID-19 and beyond Future proofing your business with effective energy management strategies
Tues, Nov 3 Tues, Nov 10 Wed, Nov 18 Tues, Nov 24
In all cases, the webinar is to run for one hour and start at the following time: 4:00 pm Atlantic, 3:00 pm Eastern, 2:00 pm Central, 1:00 pm Mountain and 12 noon Pacific. Recordings will be available for those who miss the live sessions. The dates above are tentative. For up-to-date information, and to register for the webinars, please visit www.cfaa-fcapi.org. If you want to receive more information directly from CFAA, please ensure you are signed up to receive CFAA’s e-Newsletter, by e-mailing firstname.lastname@example.org. We look forward to seeing you at CFAA’s webinars in the Fall of 2020!
CFAA Rental Housing Compensation Survey 2019-2020 The only Canadian survey of rental housing employee compensation and benefits. Find out market compensation for all key positions in the sector, at the city or provincial level. To purchase the survey, e-mail email@example.com. MOBILE FRIENDLY
Visit www.cfaa-fcapi.org for more information.
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