New rental construction in Canada remains slow despite a multi-billion dollar federal tax break introduced two years ago, according to new data, reports Blacklock’s Reporter.The Canada Mortgage and Housing Corporation (CMHC) reports builder sentiment has actually worsened, contradicting earlier government optimism.The findings, from CMHC's June 13 Rental Housing Development Study and its latest Housing Observer report, showed 42% of developers expressed pessimism about the near future. Only 29% felt confident about the short term feasibility of new projects.This decline in optimism comes despite the GST holiday on new purpose built rental housing passed by parliament in 2023. Bill C-56 removed the federal GST on such projects built by 2036, at an estimated cost of $4.6 billion..At the time, then-housing minister Sean Fraser predicted a major impact. "This is going to cause an awful lot of home builders to take that project that has been yellow-lit, green-light it and start building right away," Fraser told a parliamentary committee in 2023. “What do you think the impact is going to look like across the country?” asked Liberal MP Michael Coteau (Don Valley East, ON). “By removing the GST, I have seen estimates as high as 200,000 to 300,000 new homes for Canadians over the next ten years,” said Fraser.Former finance minister Chrystia Freeland later amplified expectations in 2024, suggesting the measure would help create homes for "millions" of younger Canadians seeking entry to the middle class.However, CMHC analysts found developers remain hampered by persistent challenges. ."Short-term sentiment has worsened significantly," they wrote. While acknowledging easing interest rates and slowing construction cost growth, developers cited high ongoing expenses and "financial viability" concerns due to forecasts of softening revenue. They also pointed to development fees, tariffs, and difficulty accessing financing."Short-term risks – costs, financing hurdles and trade uncertainty – continue to slow momentum," said the Housing Observer report released on Friday. It concluded that overcoming Canada's rental housing shortage requires "more targeted support, streamlined processes and innovation," beyond the GST cut.The report noted a clear shift among developers towards a more "neutral or cautious outlook" for 2025 compared to previous surveys. The hoped for surge in rental construction following the tax break has yet to happen, leaving the policy's effectiveness in doubt as housing pressures continue.
