An In-Depth Look at the Liberal Housing Plan: Missing Middle’s Perspective
At the Missing Middle Initiative, we’ve received a wave of inquiries regarding the new federal Liberal housing plan. Many of you have noted that several of its key facets are recommendations we’ve championed in initiatives like the National Housing Accord, Blueprint for More and Better Housing, and the Housing Canada Plan. Although we initially hadn’t planned to evaluate any party’s housing proposals, the volume of questions prompted us to share our insights.
Our Approach
This analysis doesn’t strive to provide a definitive grading of the Liberal housing plan against those of other political parties. Instead, we aim to dissect various components and furnish necessary context. We’re experimenting with a format inspired by NHL commentator Elliotte Friedman’s 32 Thoughts series. If you appreciate this structure, please show your support by liking this post and subscribing. Your feedback will encourage more such analyses in the future.
Framework of the Liberal Housing Plan
The Liberal housing plan consists of over a dozen commitments that can be categorized as follows:
- Creation of a New Crown Corporation: Build Canada Homes (BCH)
- Innovation Policies to Enhance Productivity and Reduce Costs in Homebuilding
- Tax Reforms and Reduced Development Charges to Attract Investment
- Regulatory Reforms
The most spotlighted aspect of the plan is the Build Canada Homes (BCH) initiative, which has been presented as a key element meant to garner significant media attention. While this initiative is indeed noteworthy, we contend that the tax reform elements are poised to have the most substantial impact on homebuilding.
Key Components of the Liberal Housing Plan
1. Reintroduction of the MURB Program
The Liberal plan proposes reinstating a tax incentive known as the Multiple Unit Rental Building (MURB) cost allowance, originally established in the 1970s. This incentive incentivized the construction of rental apartments and is projected to stimulate significant new developments, particularly in the rental market.
The MURB program allows investors to deduct various expenses from their personal taxes, including the advantageous flow-through of depreciation. With an increase in depreciation rates—from 4% to 10%—the investment landscape for rental construction becomes more appealing.
Critically, implementing MURB is expected to redirect investors from purchasing individual homes to constructing new rental units, thus easing competition between families and investors.
2. Doubling Canada’s Housing Construction Rate
Another ambitious facet of the Liberal plan promises to double Canada’s housing construction rate to 500,000 homes per year over the next decade. However, this is a complex proposition. Many challenges, such as zoning restrictions and permitting issues, remain unaddressed. Projections suggest that a more realistic target would involve constructing approximately 330,000 homes annually to adequately meet growth demands.
3. Build Canada Homes (BCH)
The establishment of BCH aims to revitalize the federal government’s involvement in home construction. It seeks to build affordable housing on public land, stimulate a new housing sector, and provide financial backing to builders dedicated to affordable homes. While there’s great potential here, challenges abound, particularly in focusing on alternative housing types such as fourplexes or small apartment complexes that don’t align with historical construction practices.
4. Tax Adjustments and Development Charges
The Liberal plan articulates a commitment to cutting municipal development charges by half for multi-unit residential housing. This change is expected to significantly reduce costs for developers and consequently, increase the supply of affordable housing. However, this strategy risks inadvertently creating inequities across regions, as municipalities have unique circumstances dictated by local real estate and developmental needs. A more equitable approach could involve a flat-sum rebate system to ensure fairness across various municipalities.
5. Supporting Innovative Homebuilding
Innovation is a critical theme within the Liberal platform, aiming to support prefabricated and modular housing, which can reduce construction time, lower costs, and minimize emissions. While bold, such projects require a considerable adjustment phase. The BCH promises significant investment in developing a local industry for innovative building solutions, bolstered by guaranteed minimum orders that can stabilize demand.
6. Regulatory Reforms
The plan outlines a commitment to accelerate the speeding up of permitting processes and simplifying the Building Code. However, specifics on what these reforms will entail remain ambiguous. The successful implementation of such reforms is crucial to reducing barriers that hinder timely construction.
7. Facilitating Housing Conversion
Finally, the proposal includes measures to facilitate the conversion of existing structures into affordable housing units through tax incentives for private owners. This aspect aligns with broader recommendations aimed at encouraging the protection and reinvestment of existing rental inventories.
Conclusion
The Liberal housing plan exhibits many promising elements that align with recommendations aimed at resolving Canada’s housing crisis. However, it is far from a panacea. Aspects like the reintroduction of the MURB and support for prefabrication can accelerate housing solutions, but the realization of ambitious targets like 500,000 homes annually remains uncertain.
While the plan has laudable goals, further clarification of specific strategies and a commitment to ongoing monitoring will be vital in ensuring these ambitious proposals translate effectively into meaningful housing solutions. With careful implementation and proactive adjustments, progress toward a more equitable housing landscape in Canada is possible.
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