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How bad is core housing need in Canada, and what can be done about it?

Feds back away from some of the controversial proposed corporate tax changes, but trouble may still be afoot.

Are you meeting the right people to grow your business? Join your colleagues at CFAARHC 2018 in Vancouver.

NATIONAL OUTLOOK – DIGITAL EDITION available at CFAA Member Associations Eastern Ontario Landlord Organization (EOLO) P: 613-235-9792 Federation of Rental-housing Providers of Ontario (FRPO) P: 416-385-1100, 1-877-688-1960 Greater Toronto Apartment Association (GTAA) P: 416-385-3435 Hamilton & District Apartment Association (HDAA) P: 905-632-4435

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Investment Property Owners Association of Nova Scotia (IPOANS) P: 902-425-3572

Professional Property Managers’ Association (of Manitoba) (PPMA) P: 204-957-1224

LandlordBC P: 1-604-733-9440 Vancouver Office P: 604.733.9440 Victoria Office P: 250-382-6324

Saskatchewan Landlord Association Inc. (SKLA) P: 306-653-7149

London Property Management Association (LPMA) P: 519-672-6999 Manufactured Home Park Owners Alliance of British Columbia (MHPOA) P: 1-877-222-4560

Waterloo Regional Apartment Management Association (WRAMA) P: 519-748-0703

The Canadian Federation of Apartment Associations represents the owners and managers of close to one million residential rental suites in Canada, through 11 apartment associations and direct landlord memberships across Canada. CFAA is the sole national organization representing the interests of Canada’s $480 billion rental housing industry. For more information about CFAA itself, see or telephone 613-235-0101.

NOV 2017

New CMHC core need data again shows the need for a portable housing benefit On November 15 this year CMHC reported that 1.1 million renter households were in core housing need in 2016. Since there are a total of 4.5 million renter households, that is about one in four renters. The vast majority of renters in core housing need are in core housing need due to affordability, because they pay more than 30 per cent of their gross household income on their rent (and need to pay that much to rent a unit of suitable size at the median rent in their community.) Among homeowners, 574,000 households were in core housing need out of a total of about 8,840,000 owner households. About

one in 15 homeowners is in core need, while one in four tenants is. Presumably the connection is that if you have a good income, you can buy your home, but if you don’t, you usually rent. CMHC’s data also shows that about one third of households leave core need each year, while roughly the same number of households enter core need. Another one in three households exit core need within two years, and they are also replaced. That churn shows the fallacy of attempting to address affordability mostly through building more social housing.

In April 2016 the federal government and CMHC began the consultation to create Canada’s first-ever National Housing Strategy. Broad consultation showed that affordability was the primary issue. On November 22, Prime Minister Justin Trudeau and Housing Minister Duclos announced a strategy that includes:


$4B for a new portable Canada Housing Benefit (over 6 years, from 2020 – a major step in the right direction) $15.9B to repair and build social and affordable housing (over 10 years) $4.8B to maintain rent subsidies for existing social housing tenants and co-op members (over 10 years).

If by a miracle, or a herculean effort, Canada built a million social housing units to house the renter households who are in core need this year, we would still have to build another half million units the next year, and

Many other features in the NHS are also worthy of approval, including:

The target to reduce chronic homelessness The priority being placed on contributions to repairing and retrofitting existing rental housing The planned campaign to reduce NIMBYism around affordable housing.

For more information, see

another half million the year after that, and so on. Building one million social housing units would cost more than 250 billion dollars. Just paying the interest on that money would cost 7.5 billion dollars per year.

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NATIONAL OUTLOOK In addition, the vast majority of households in core housing need are not homeless or living in tents. They are living in adequate housing, which costs them an unacceptably high proportion of their income. Through a housing benefit attached to low-income renters, the problem of housing affordability could be cut in half at an incremental cost of 1.2 billion dollars per year. Then when households leave core need their benefit can be readily re-directed to the households that have entered core housing need. One point two billion dollars amounts to about 15 per cent of what the federal government is now committed to spend on the Canada Child Benefit, or 2 per cent of what it spends on Old Age Security and the Guaranteed Income Supplement for Seniors. A portable housing benefit would target poverty and housing needs in an extremely efficient and cost-effective way. As well as being cost-effective, portable housing benefits: - allow tenants a wide choice of where to live; - achieve income mixing without the cost of subsidizing middle income tenants; - use the existing economical housing stock, rather than newly built (and therefore expensive) housing; - allow the available funding to be spread more equitably among more low-income tenants; - allow flexibility in program design to respond to different regional needs and provincial budgets; - allow the provision of assistance quickly; - can eliminate deep core need regardless of a household’s place on a chronological waiting list; - allow tenants to keep their housing assistance when they move to take a new job (which is good for them and the economy); - avoid the stigma often associated with public housing; - can easily be used in rural areas and small towns where there are no large rental buildings; and - can be administered at very low cost. Because of those advantages, almost all other First World countries use portable housing benefits to a significant extent. Those countries include: Australia, Austria, Belgium, Czech

Republic, Denmark, Finland, France, Germany, Ireland, Netherlands, New Zealand, Norway, Sweden, Switzerland, United Kingdom, United States.

Why not implemented in Canada? So with all these features in their favour, why are portable housing benefits not used more in Canada? It comes down to jurisdictional issues among the federal, provincial and territorial governments. For 50 years, the federal government considered that a housing benefit was not really a housing program; and so, year after year it directed its money to subsidizing bricks and mortar through CMHC. Only recently has the federal government allowed the provinces to use its housing money for portable housing benefits or rent supplements. In contrast, BC, Manitoba and Quebec have been using portable housing allowances for 40 years with 100 per cent provincial funding. Only recently have other provinces begun to use portable housing benefits, sometimes with their own funds and sometimes on a cost shared basis. (The problem is that the provincial programs are limited in coverage, in part because federal housing money could not be directed to those programs.)

What other housing supports are needed? CFAA and landlords recognize that some people need more than just financial help to maintain a stable home. For those people other support services can be used along with portable housing benefits or rent supplements. In particular, the chronic homeless require significant supports as well as money, and such supports can sometimes be better provided in supportive housing environments. Therefore, individuals with special needs, including addictions, mental illness, or serious disabilities, may be better served by providing public or social housing, or providing rent supplements and support services, rather than portable housing benefits. However, for the vast bulk of low-income people, portable housing benefits are the optimal housing support.

Want to stay up to date? 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 to start receiving National Outlook today! | 37

NOV 2017

Proposed tax reforms – still a concern By John Dickie, CFAA President On July 18, 2017, Finance Minister Morneau proposed the most significant changes to the Canadian tax system in 40 years. Over 21,000 Canadians, businesses and associations made submissions on the issues by October 2. Thanks to that outcry and the work of the Canadian Federation of Independent Business (CFIB), CFAA, and over 80 other associations in the Coalition for Small Business Tax Fairness, the government has now retreated somewhat from its proposals. This article sets out what Finance Minister Morneau proposed on July 18, what he has now proposed as of October 20, what is still to be fleshed out and what position CFAA is taking.

The proposed federal tax changes only apply to people who receive income as dividends derived from private corporations, or who hold real estate through corporations. There are apparently no plans to affect public companies or REITs or people who hold real estate in their own name (or with their spouse). Investors who currently pay tax at the top personal rate on passive income should also not be affected. Readers should remember that for landlords the small business tax rate of 15% is typically only available for the income that results from management activities or fees. Most rental income is considered to be passive income and is taxed at the highest corporate tax rate of 50%, which is almost the same as the highest personal tax rate of 53%. The rental income of corporate landlords with more than five full–time employees is treated as active business income, and taxed at 26.5%. When that income is paid out as dividends it attracts the recipient’s personal tax rates. (All tax rates quoted above are combined, rounded federal and Ontario rates in 2017.)

October 20 proposals and what is still be fleshed out

July 18 proposals

CFAA and Coalition plans

Income Sprinkling (Income Splitting) Business owners were to be required to justify dividends to family members by identifying contributions to the business by those family members.. It was unclear whether past contributions would justify current dividends.

Past contributions will qualify. The rules for past and current contributions will be made simpler and easier to apply. The actual rules and legislation enacting them are still to be released, even though this change is still slated to take effect January 1, 2018.

CFAA and the Coalition are seeking further changes which would, at a minimum, exempt spouses from the new limits on income sprinkling. That would reduce the impact of the new rules substantially. We also want the change deferred to 2019.

Lifetime capital gains exemption (the “LCGE”) New rules would have prevented business owners from transferring businesses to several family members thereby multiplying the LCGE. The new rules would have made it even more onerous to transfer a business to family members than to unrelated parties.

The government will not proceed with the proposed new rules on the LCGE , but will consult with various associations to seek other ways to address the issue.

The Coalition may take part in the consultation and address any proposed new rules. CFAA will work to address landlord-specific concerns. When that consultation takes place, CFAA will want input from members who are affected.

Income stripping New rules were to be enacted to prevent income stripping (in which dividend income is converted into capital gains.) The new rules would have had negative unintended consequences, especially on foreign investment in Canada.

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The government will not proceed with the proposed new rules to prevent income stripping, but will consult with various associations to seek other ways to address the issue.

The Coalition may take part in the consultation and address any proposed new rules. CFAA will work to address landlord-specific concerns. When that consultation takes place, CFAA will want input from members who are affected.

July 18 proposals

October 20 proposals and what is still be fleshed out

CFAA and Coalition plans

Raising the tax rate applied to certain passive income Corporations may invest active business income in other businesses or investments, including real estate, which produces passive income. Currently, that passive income is generally taxed at the high rates, but the government’s objection is that the active income that went into the investments was taxed at lower rates, and that gives those owners an advantage over other people who paid tax on their “first generation” income at the higher rates. The government proposed to increase the tax rate on such “second generation” income above normal rates, potentially to 73%.

CFAA applauds the decision to refrain from applying new rules to existing investments. The government now proposes to apply the higher tax rate “only” to new investments, not existing investments. It also proposes an exemption of $50,000 of income on those new investments. The government also says the higher rate will not apply to money which is at any time reinvested in the business, although how that would be done is unclear.

However, CFAA and the Coalition are seeking to have the passive income changes put on hold until their impact can be thoroughly assessed.

CFAA is also addressing the fact that many mid-size landlords achieve active business status for their rental income by having more than 5 full time employees. They should be able to continue to do so for all their This tax change is now slated to be part rental income. (In the past CFAA of Budget 2018. has recommended that the test be expanded to 3 or more full-time equivalents, and that continues to be our position.)

The small business tax rate

In the 2016 Budget the small business tax reduction had been cancelled.

The government is now to move forward with the reduction of the federal small business tax rate from 10.5% to 10% in 2018 and 9% in 2019. The government will also reduce the dividend tax credits on such income in keeping with the tax rate reductions.

CFAA’s planned actions CFAA will continue to monitor the proposed changes and make submissions to address the issues relevant to landlords. We are working closely with CFIB, the Canadian Home Builders’ Association and the Coalition for Small Business Tax Fairness. The CFAA Board will evaluate whether more action is needed for landlords specifically, and take such action as is practicable.

This is not a reform CFAA sought because it increases the difference between the treatment of landlords who can access the small business tax rate and the bulk of owners, who cannot. In addition, the reduction in the dividend tax credits raises slightly the effective total tax rate on past income when it is paid out as dividends.

Submissions or letters can still be sent to the government addressed to Finance Minister Morneau at and Prime Minister Trudeau at Sending a copy to your MP, and a blind copy to CFAA, would also be valuable. CFAA welcomes your input on the tax reform issues at president@ For updates, see the Tax reform section at

Are you meeting the right people to grow your business? One of the greatest challenges in growing your business, and your brand, is connecting with the right people. Every year the CFAA Rental Housing Conference attracts the right people, namely key decision makers and leaders in Canada’s rental housing industry. Sponsors and attendees of CFAA-RHC have a rare | 39

NOV 2017

CFAA Suppliers Council




CFAA would like to thank all of its Supplier Council members for their continued support.

If you would like to join CFAA’s Supplier Council, email for more information.

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NATIONAL OUTLOOK opportunity to connect with the “Who’s who” from Canada’s top apartment owners, managers and REITs. CFAA-RHC’s attendees are top senior executives, presidents, VPs, owners, investors, directors and managers, who are looking for the highest quality education, products and services to keep their vision on-track and their operations running smoothly and efficiently.

Conference topic areas

Besides learning about products and services that can help landlords attain their goals at the 2018 Suppliers Council Showcase, rental executives and all delegates will hear from Benjamin Tal, from the top executives of leading REITS, owner-managers and third party managers, in the Executive Roundtable, the Operations Roundtable and a Technology Roundtable. CFAA-RHC 2018 will also address the new marijuana regime, virtual and augmented reality, and key marketing, operational,

technology and building science issues, as well as key development issues such as planning approvals, interest rates and lending conditions, social housing development and government assistance to, and impositions on, the for-profit development sector.

Learn more

Distinguish and build your brand, your products and services by attending or sponsoring and participating in CFAA Rental Housing Conference 2018, taking place from May 14 to 16, at the Coast Coal Harbour Hotel in Vancouver, British Columbia. Please visit for more details, or to register to attend. CFAA has sponsorship opportunities to fit your sponsorship needs and budget. Email CFAA at if you would like to sponsor, or let us know what you are looking for, and we would be happy to work with you to find the sponsorship that fits your company’s needs. 


Call 416-743-8484


Toronto Head Office T: 416.743.8484 Toll Free: 1-888-968-7491 BEGLEY OVERHEAD DOORS LTD. | 41

RHB Nov 2017 - National Outlook  
RHB Nov 2017 - National Outlook  

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