Finance Minister Chrystia Freeland has signaled that Ottawa will focus on housing and the rising cost of living when it delivers its fall economic statement on Nov. 21, but economists say the government faces a delicate balancing act when It’s about how far you can go. address those challenges.
The two issues have been a priority for Canadians as high inflation, high housing costs and rising interest rates leave many in financial distress. The latest version of an ongoing Nanos poll found that inflation, jobs and the economy, and housing were voters’ top three concerns out of a list of 10 issues that also included health care, war and peace, and climate change.
In a move aimed at the housing docket, Finance Minister Chrystia Freeland will announce tax changes designed to curb the use of Airbnb Inc. and other short-term rental services in regions of Canada where those platforms are restricted, according to reports from the media. The government will prohibit landlords from deducting short-term rental expenses in areas where those services are already limited by other levels of government, Montreal’s La Presse and the Toronto Star said.
Furthermore, the government is also expected to announce billions in loans available to homebuilders and allocate a fund for affordable housing.
The federal government is about to announce $15 billion in low-cost loans for builders, which the official says will lead to the construction of 30,000 new apartments.
The fiscal update will also include $1 billion for affordable housing, which will support nonprofits and social housing organizations.
Freeland is also expected to unveil a new Canadian mortgage charter outlining what Canadians can expect from their financial institutions when they renew their mortgages.
Housing is a recognized national crisis, said Randall Bartlett of the Desjardins Group in a written submission to the House of Commons Standing Committee on Finance published on November 20.
“All levels of government bear some responsibility for the current crisis,” Bartlett wrote in the presentation, noting that not only is there not enough housing but also the type of housing people need, such as semi-detached houses, semi-detached houses and low-rise apartments. . They are not being built.
The Montreal-based financial group released a list of policies and initiatives to address the housing dilemma, including reducing housing approval delays, eliminating exclusionary zoning, changing density bylaws, deferring, reducing or eliminating property taxes or development fees on new rental construction and offering financial incentives such as low-interest loans.
“There is no silver bullet that will solve Canada’s housing crisis. Rather, it is a combination of different policies introduced by all levels of government in a coordinated manner that will help increase housing construction,” Bartlett said in the presentation.
There is no silver bullet that will solve Canada’s housing crisis.
Randall Bartlett, Desjardins
As the housing crisis intensifies, the Liberals are far behind the Conservatives in the polls; Nanos’ most recent weekly poll shows 33.7 per cent of Canadians prefer Pierre Poilievre as prime minister, compared to 21.2 per cent for Justin Trudeau.
That has led some to predict that the Liberals will use the update to try to regain lost political ground while also trying to maintain a semblance of fiscal responsibility as the economy cools.
“Trudeau and the reigning Liberal government will attempt to regain the political support of Canadians desperate for affordability,” National Bank of Canada economists Taylor Schleich and Warren Lovely wrote in a Nov. 17 prefatory note.
Both believe deficits for this year and beyond will be slightly higher than originally forecast in the budget presented in March, but do not expect new “broad grants” like the grocery rebate in Budget 2023 that provided a one-time payment. to qualifying Canadians in July to help with the rising cost of food.
Desjardins’ Bartlett said Canada is seen as “the cleanest dirty shirt in the fiscal laundry basket,” meaning its deficits are not as severe as those of the United States and other countries, and that Ottawa, therefore, Therefore, it has some room for maneuver to increase spending.
He hopes Ottawa will do just that, “given the recent spate of cost-free announcements.”
But Desjardins warned that March’s deficits and debt outlook have been steadily undermined by pay deals with public servants, unrealized revenues and savings, a possible national pharmaceutical care program and the cost of recently announced carbon tax relief for residents in warming Atlantic Canada. their houses with oil.
“Taken together, these factors have helped further erode the federal government’s fiscal space, but we cannot be sure to what extent,” Bartlett said.
As high borrowing rates raise the cost of debt, Bartlett suggested Ottawa should use the update to “outline fiscal anchors and stick to them.”
Royal Bank of Canada economists expect housing supply to be the focus of the fiscal update, according to a Nov. 17 note.
RBC also warned that the slowdown in Canada’s economy could influence the update.
“A backdrop of slower economic growth is also weighing on the government’s purchasing power, with the Parliamentary Budget Office estimating that the deficit for the current fiscal year will be $6 billion higher than expected in the last budget,” the government said. bank.
In October, Freeland said the update would be limited in scope.
“It will focus on building more new homes faster and making more new homes available for Canadians to live in, making life more affordable for Canadians and continuing to deliver on our fiscally responsible economic plan,” he said.
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In the spring budget, the deficit for 2023 was projected at $40.1 billion, but recent updates from the parliamentary budget officer predicted the deficit could rise to $46.5 billion due to higher interest rates and lower revenues. as cash-strapped Canadians spend less, and in a series of housing calls held with municipalities in the country.
— With additional reporting from Bloomberg and The Canadian Press
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