THE FEDERAL GOVERNMENT’S HOUSING PLAN

The Liberal government’s Budget of April 16, 2024 (budget.canada.ca) has committed billions of dollars to support building new housing, recognizing that the shortage of housing in Canada has become a serious crisis, and hoping to get almost 4 million new homes built over the next 7 years.

Some of the measures proposed are not tax measures. They include, among others:

• reallocating land owned by the federal government for building homes, including Canada Post properties, National Defence properties, underused federal offices, and other public lands;
• construction loans offering low-cost financing to builders of new apartment buildings;
• scaling up modular housing, to make it easier to build during the winter;
• a “housing design catalogue” with pre-approved blueprints to speed up construction of modular housing, row housing, fourplexes, sixplexes and accessory dwelling units.

If you are involved in building or owning apartment, or are looking to buy your first home, there are also some tax measures to be aware of:

• For rental housing whose construction begins after April 16, 2024, the capital cost allowance (tinyurl.com/claiming-cca) (tax depreciation) rate is increased from 4% to 10% of the declining balance every year, This will allow faster writeoff of construction costs, and will thus lower the after-tax cost of building or buying a new apartment building for rental.
• The Home Buyers’ Plan (HBP — tinyurl.com/what-hbp), which allows you to borrow funds from your RRSP to buy a home (if neither you nor your spouse has owned a home in the past 5 years), will be increased from $35,000 to $60,000. As well, you will be able to spread the repayment of the loan back to your RRSP over 18 years instead of 15 years. The HBP is in addition to the recently introduced First Home Savings Account, which works very much like an RRSP and allows accumulation of tax-free funds that can be used towards buying a home. (See tinyurl.com/fhsa-cra.)
• The federal government is also considering introducing a new tax on residentially zoned vacant land, to encourage building on the land. The government will launch consultations on this issue later in 2024.