Happy Monday Morning!
Over the past several months we’ve been highlighting the marked slowdown in residential building permits, a leading indicator of future supply. This is what happens when the cost of capital doubles, and in some cases, triples.
This is a disaster in the making for a federal government insistent on maintaining immigration targets, and in fact far exceeding them, with 1.2 million new migrants moving to Canada last year. Sliding in the polls, the Liberal government has been in full panic mode. With their feet to the fire we finally got some change.
Just this past week the Liberal government announced the removal of GST on purpose built rental units. They had proposed this change back in 2015. As they say, better late than never.
So effective immediately, this change increases the GST Rental Rebate from 36% to 100% on all brand new rental construction consisting of a minimum of four private dwelling units. In other words, a 5% savings for rental developers, which will be enough to revive some projects that otherwise never stood a chance in this economic environment.
Hopefully this allows the rental constuction boom to continue. You’ll notice rental construction took off in the last few years, almost exclusively thanks to CMHC’s new rental programs which provide developers with incredibly lucrative finacing for new rental. In some cases you can finance up to 95% of project costs and 50 year amortizations on completion.
But why stop there? The housing “accelerator” fund got its first participant after eighteen months, with the housing minister threatening other cities, such as Calgary, to play ball.
And play ball they did. Calgary city council members approved a long-awaited housing strategy Saturday, which includes a plan for reducing red tape through blanket rezoning of residential districts. The proposal for blanket rezoning to R-CG in Calgary still requires public engagement and council deliberation before any changes could come into effect to legalize new missing-middle housing zoning designations.
Currently, more than 60% of residential properties in Calgary are zoned to only allow single family homes as a default.
This recommendation now asks to change the default zoning type to RC-G, which would allow for duplexes and row houses on single family lots.
But wait, there’s more!
Here in Vancouver, city council approved a citywide densification for all RS zoned single family lots to permit multiplex housing. A standard size single family lot (4000sqft) can now accommodate 4 units, and larger lots up to 8 units.
Density increases to 1.0 FSR for multiplex.
Progress, slowly but surely.
Make no mistake none of this is going to fix Canada’s housing crisis overnight. It is going to take a herculean effort over the next decade, one that requires the government and the private sector to work hand in hand.
In the near term the laws of economic gravity are going to curtail new housing supply but at least we are laying the ground work for a healtheir housing market, and hopefully more prosperous economy in the long run. Sometimes all it takes is a little political pressure.
And for all you supply doubters, here’s one for you.
Supply and demand my friends. Never fails, except in housing apparently.