Welcome to the concluding analysis of Canada’s Housing Plan and Budget 2024. This part focuses on the less favorable elements of the plan, including one particularly concerning measure both for the economy and the housing sector. You can also check out the previous parts containing the good (part 1) and the good marketing (part 2).
The Bad 😕
- Canadian Renters’ Bill of Rights:
- Rent Payments in Credit Scores: This inclusion might sound beneficial, but it hardly impacts the mortgage approval process due to the low number of rejections based on credit scores. Furthermore, obligating small landlords to report to credit bureaus is poorly conceived and potentially harmful. 📉
- Historic Rent Prices Disclosure: Despite a high occupancy rate nearing 99% across Canada, this measure won’t empower renters to negotiate better rents. It’s merely a bureaucratic gimmick that could ultimately increase costs for renters. 🚫
- Crackdown on Short-Term Rentals:
- While initially appearing positive, this government initiative is poorly planned and could lead to numerous unintended consequences, including legal challenges from landlords wanting to convert short-term rentals into long-term housing or use them personally. This could create a legal and operational mess. ⚠️
The Ugly 😖
- Capital Gains Changes (Effective June 25):
- For Corporations and Trusts: Capital gains are now taxed at 66%, starting from the first dollar.
- For Individuals: The 66% tax rate applies to gains exceeding $250,000.
- This adjustment mainly impacts real estate investors who sell secondary or recreational properties where gains exceed $250,000—raising their tax liability significantly. For instance, selling a property bought for $500,000 at $750,000 would now result in $166,750 taxable income, up from $125,000 under the old rules. 📈
- Properties owned through holding companies face the new tax rate from the first dollar, while primary residences remain unaffected as they don’t attract capital gains tax. 🏠
This wraps up our series on Canada’s 2024 Budget and Housing Plan. We’ve uncovered the good, the marketable, and the potentially problematic aspects of the government’s approach to tackling the housing crisis. Stay informed and engaged as these policies begin to take effect. 🏘️
Conclusion
- The government measures to improve the housing announced over the last few weeks and months, overall are not as bad as the opposition and some people make it out be. Some of the supply side improvement measures are actually good announcements but time will tell how much and how well they get implemented. But even charitably put, these measures are too little and definitely too late to make an immediate or even a medium term impact.
- On the flip side, the measures are also definitely not as good as the government is projecting it to be. There are plenty of filler announcements only designed to by and large sound good – such as the renter’s rights and the mortgage charter. And then there are a few which are quite problematic – such as the capital gains tax hike, the government’s not fully thought out crackdown on short term rentals etc.
- The bottom line is that this govt. was caught completely unawares of how bad the housing situation was in the country over the last several years. It woke up when the polls started looking terrible for them, particularly on housing, and then scrambled.
- And sadly, even the good measures of the govt. which will improve housing supply, add talent for the housing industry, build more rental housing etc. will take years to accomplish even if everything planned does get accomplished.
- Being asleep at the wheel, sucks!
