The federal government plans to strengthen competition laws, cut the GST from new home rental construction and push grocery chains to stabilize prices or face consequences, in a wide-reaching effort to address the rising cost of living that the Liberals acknowledge has left voters angry and frustrated.
Prime Minister Justin Trudeau unveiled the measures at the end of a three-day caucus retreat in London, Ont., where the beleaguered Liberals have been regrouping in the face of declining public opinion polls, falling fundraising numbers and a resurgent Conservative Party.
The caucus began with questions about the Prime Minister’s leadership and whether he turned a blind eye to an issue that he now concedes is at crisis levels. Mr. Trudeau’s cabinet ministers and backbench MPs arrived at the meetings anxious to see a clear plan from the government to address the rising cost of living – the key issue that Liberals say has sent their fortunes plummeting.
To address the housing crisis, Mr. Trudeau announced Thursday that the government is reviving a broken Liberal promise from the 2015 election campaign to remove the GST from new rental construction, including apartment buildings, student housing and seniors’ residences. He called on provinces to follow suit so that all sales taxes would be removed from new rental construction.
“This is something that all Canadians are worried about,” Mr. Trudeau told reporters, saying the move would lead to more apartment construction across the country.
He said Thursday’s changes marked the beginning, not the end, of his government’s response to the affordability crisis, adding that “Canadians are struggling right now.”
The 100-per-cent rebate on the federal goods and services tax, which is effective immediately, will be available to all new construction that begins before the end of 2030 and is completed before the end of 2035. The government estimates that the program, in its first six years, will cost the treasury $4.6-billion.
Ontario has already said it would lift the provincial sales tax from new rental construction “as soon as possible.” Federal Housing Minister Sean Fraser said Newfoundland and Labrador has also agreed to lift its sales tax.
In statements to The Globe and Mail, Quebec and Nova Scotia said they were still reviewing the federal decision. British Columbia does not charge provincial sales tax on the sale of purpose-built rental buildings and Alberta does not have a provincial sales tax.
With an eye on the grocery sector in particular, the government said reforms to the Competition Act will be on its list of legislative priorities when the House of Commons resumes next week.
The minority Liberals said the proposed amendments will strengthen the Competition Bureau’s investigative powers, make it more difficult for anti-competitive mergers to go ahead, and allow the competition watchdog to prevent collaboration among businesses that stifles competition.
On top of the legislative changes, the federal government has summoned the leaders of Canada’s five largest grocery-store chains to Ottawa next week to come up with a plan to stabilize prices and “ideally start bringing them down,” Mr. Trudeau said.
The government will give Loblaw, Sobeys, Metro, Costco and Walmart until Thanksgiving to come up with a plan. If they fail, Mr. Trudeau said the government would look at other options, including new tax measures.
Ottawa’s plan to lift the GST for new rental construction was widely welcomed on Thursday and comes after premiers, housing and construction groups and other experts had called for the change.
GST charges were found to be “one of the most significant barriers” to construction in B.C., according to a recent report from the Urban Development Institute in Vancouver. The group said the federal tax is the largest single tax or fee in a rental project budget, accounting for almost 10 per cent of an average unit’s starting monthly rent in Vancouver.
CIBC deputy chief economist Benjamin Tal, who briefed the federal government at its August cabinet retreat, said Thursday the change “will lead to a notable increase in purpose-built rental activity all over the country.”
“For too many years we used demand tools to fight supply issues. This is a significant move to improve supply,” he told The Globe. He said it was one of the recommendations he made to cabinet last month.
The 2015 Liberal promise to remove GST would have also applied to rental-building renovations. The program announced Thursday does not cover such projects because the government said it wants to avoid renovictions. However, retrofits of non-residential real estate, such as office buildings, into a residential complex would qualify.
The federal government says it decided not to pursue the promise when it was first made in 2015 because the government determined that “there were more effective ways than GST rebates to encourage the construction of affordable rental housing.”
Asked to explain to voters why he had decided to act now on a program that his government had already promised eight years ago and then ditched seven years ago, Mr. Trudeau said the context had changed because of the recent rise in interest rates.
Mr. Fraser said the government believed it could get a “better return” if instead of removing the GST, it launched the rental construction financing initiative, which provides low-cost loans to rental-unit developers.
The government unveiled its new policies on the same day Conservative Leader Pierre Poilievre released his housing plan in Vancouver. The Official Opposition’s momentum in the polls and fundraising follows months of Mr. Poilievre attacking the government over housing, the cost of living, and the economy.
The Conservatives would also remove the GST on the building of any new homes, but their measure would apply only to buildings with rental prices below market value. The party said they would fund this using the money the Liberals allocated for the Housing Accelerator Fund, which the Conservatives said is a failed policy.
Mr. Poilievre said he will introduce the changes through a private member’s bill in the House of Commons that he is calling the Building Homes Not Bureaucracy Act. As part of the bill, the Conservatives would require cities to increase the number of homes built by 15 per cent each year or incur federal funding cuts. A bonus would be given to cities that exceed the housing targets.
“We need a mathematical formula that gives more money to cities that build more homes and less money to municipalities that block homes,” Mr. Poilievre said, as he called on the Liberals and NDP to support his bill when it is introduced in the House of Commons.
He also proposes selling 15 per cent of federally owned buildings contingent on them being turned into affordable homes. As well, Mr. Poilievre said the federal housing agency should process applications within 60 days.
The opposition parties widely criticized the Liberals for announcing a policy that they had previously rejected. NDP Leader Jagmeet Singh said Canada wouldn’t be in the current crisis if the government hadn’t broken past promises and had acted faster to implement the ones it did move on.
“We’re not in this situation by accident,” Mr. Singh said in a statement. “Justin Trudeau made choices to delay taking action and he’s consistently disappointed Canadian renters and homeowners.”
SENIOR POLITICAL REPORTER
The Globe and Mail, September 15, 2023