Rising inflation cuts deep
This week marks the beginning of the fall sitting of the House of Commons. However, the discussions in Ottawa differ significantly from what I hear from citizens in our riding of Central Okanagan-Similkameen-Nicola.
The most common concerns raised by local citizens in our riding relate to rising interest rates and inflation. This is due to the recent announcement by Statistics Canada that Canada’s inflation rate for August rose by 4.0% year over year, following a 3.3% increase in July.
Many citizens are now experiencing severe anxiety as they fear further interest rate increases from the Bank of Canada. It has become a common concern to hear from citizens struggling to cover their bills at the end of the month.
In response to these concerns, the Prime Minister called a meeting with representatives from Canada’s five largest grocery stores. The Prime Minister requested that grocery prices be stabilized by Thanksgiving in October, or the stores would be subject to higher taxes.
However, experts, including stakeholders within the grocery industry, have pointed out that adding more costs to grocery stores through increased taxation will increase prices rather than decrease them. Some recent expert reports suggest that grocery prices will likely stabilize independently in the coming months without government intervention. These reports also highlight increased costs from farmers and grocery producers, such as higher transport costs, as a significant cause of grocery store price increases.
I’m not sure if the Prime Minister was sincere in his threat, as many have suggested that this action was more for show to give the impression of taking action without actually doing so.
In a separate announcement, the Prime Minister committed to removing the Goods and Services Tax (GST) on new rental apartment construction. The removal of GST on rentals is not new in Canadian politics: Pierre Poilievre, the Conservative leader, has long been calling for a new approach.
While reaction to this announcement has been mixed, from my view, it is a positive step as this issue is boiling over with very real impacts to people.
Given that higher interest rates have halted many large apartment projects, this may encourage some of these purpose-built rentals on the financial margins to proceed.
Such new rental housing stock would be welcomed, especially in the fast-growing municipalities of our area, where the rents are highest and vacancies lowest. New rentals would provide more choice and competition, particularly for new workers, which is a crucial for employers in attracting and retaining workers.
However, there is no guarantee that newly constructed rental housing will be offered at rates below the current market rates. Additionally, it is uncertain if these projects on the margins will be sufficient in quantity to slow down rapidly rising rental rates or increase local vacancy rates.
Pierre Poilievre has introduced legislation, known as “The Build Homes, Not Bureaucracy Act,” to address this issue and others. It allows for a GST rebate of up to 100% depending on whether the rent offered is below the local market average for 5 years and must be built within three years to qualify. This is to ensure that developers are incentivized to serve the immediate public need for more affordable rentals.
Right now the Government’s new policy is to give 100% GST off to every apartment rentals, meaning that developers of luxury apartments, due to the higher cost per unit will receive a higher rebate compared to the developer who creates more affordably priced apartments that are desperately needed. Unlike Pierre Polievre’s plan, it only applies to apartment purpose built rentals and not to smaller, affordable rentals offerings such as coops, duplexes, fourplexes and the like.
In conclusion, while removing GST on rental construction on apartment buildings is a positive step, it is no silver bullet and I recommend the Government to look across the isle for more ideas on how to build more affordable rentals.
My question this week is: Do you think that removing GST on rental construction as the Government has done will be sufficient to increase rental affordability? Why or why not?
Please feel free to contact me at Dan.Albas@parl.gc.ca or call toll-free at 1-800-665-8711.