Mon. Dec 4th, 2023

The Trudeau government promises a “targeted” and “cautious” economic update.

Airbnb-type properties in Ottawa's sights

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Ottawa wants to do more to fight the housing crisis, in particular by targeting platforms like Airbnb.

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The economic update to be tabled Tuesday in Ottawa will include a measure to make short-term rentals, such as Airbnb, less tax attractive for certain owners. The government will also commit billions in loans and grants to accelerate housing construction.

After being criticized by the Conservative leader for his inaction in the face of the housing crisis, the Liberal government is trying to show that it is taking concrete measures to tackle it.

According to information obtained by Radio-Canada, Ottawa intends to prevent owners from making tax deductions for properties offered for rental in short term when they are located in areas where this practice is prohibited.

Under the new proposed measure, it would now be impossible for them to deduct certain rental expenses, such as interest charges, property taxes and the cost of repairs. This measure, which will require legislative changes, must come into force on January 1, 2024.

Regulations on short-term rental properties vary greatly from one city and province to another. For example, in Montreal, several boroughs limit short-term commercial tourist rentals to certain areas or outright prohibit (like in Verdun). Thus, Ottawa wants to align its fiscal policies with the framework imposed by cities and provinces.

The federal measure also plans to penalize delinquent owners. Those who find themselves in violation of provincial or municipal regulations regarding short-term rentals would have their request for tax deductions refused by the Canada Revenue Agency (CRA).

For example, in Quebec, owners who want to rent short-term must register with the provincial authorities.

According to a government source, this approach aims to make short-term rental properties less lucrative and to discourage landlords who break the rules. The idea is to change the equation for owners, explains this source.

The update will also include money for municipalities to to help them enforce their rules governing short-term rentals.

The government hopes its proposal will encourage more cities to regulate short-term rentals, which would help alleviate the shortage of housing in the long-term rental market.

Statistics Canada estimates that revenues from the private short-term accommodation market in Canada were $2.8 billion in 2018.

According to information from CBC, the economic update also provides an amount of $15 billion for the granting of loans, with a duration of 10 years and under advantageous conditions, which will be used for the construction of new rental housing.

The Canada Mortgage and Housing Corporation will be responsible for administering everything to the builders.

Still according to CBC, Ottawa will also create a billion-dollar fund to finance the construction of non-profit social housing in the form of subsidies.

According to the government source consulted by Radio-Canada, the government strategy to tackle the housing crisis has two components: unblocking the country's underutilized real estate stock and accelerating residential construction.

In September, the Trudeau government announced that it was going to exempt the construction of new rental housing from the GST.

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The Liberal government is targeting savings of around $15 billion.

To counter the rising cost of living, the economic update is also expected to include additional competition changes that are expected to impact the grocery sector. This is among the demands of the New Democratic Party in Ottawa.

The government tabled Bill C-56 in September to give more powers to the Competition Bureau to allow it, in particular, to investigate industries that engage in unfair competition, for example in cases of excessive price fixing or price increases. According to our information, the economic update should offer additional additions that go beyond what C-56 contains.

While Canadians are forced to tighten their belts because of inflation and high interest rates, the federal government intends to demonstrate fiscal responsibility, assures our source. The exercise will be targeted and careful.

We must make choices. We are no longer in the trough of the pandemic, she explains. It's not like a mini-budget, this source argues, a matter of moderating expectations.

The federal government's spending capacity is not infinite.

A quote from A government source

Conservative leader Pierre Poilievre accuses the Liberals of spending lavishly and of having contributed to inflation with inflationary deficits. The last federal budget did not include a plan to return to budget balance. Last month, the Parliamentary Budget Officer forecasted that the federal deficit will reach $46.5 billion in 2023-2024 (New window), up from the estimate of $38.7 billion for 2022 -2023.

The Trudeau government has also asked its various ministries to find $15 billion in savings. The head of the Canadian Armed Forces is also concerned about the impact that these restrictions could have on the degree of preparation of his organization.

However, the Trudeau government maintains that economic reality must be taken into account in the choices that will be made on Tuesday. Private sector economists point to slower growth as well as higher interest rates for longer. All of this has an impact on the way we make our choices, explains our government source.

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