1. A temporary increase in the current depreciation (“DPA”) deduction could offer the possibility of carrying out housing projects expressly built for rental.
What’s new? The temporary increase proposed within the framework of the budget brings the rate of DPA from 4 % to 10 %. It applies to new housing projects expressly built for rental. The start -ups must start between April 16, 2024 and December 31, 2030 for a project to be eligible.
What could be the repercussions?In Canada, owners of buildings could see a significant increase in housing projects expressly built for eligible rental, commercial real estate organizations seeking to ensure that buildings are built on time. That said, the simultaneous submission of too many new projects in the system could lead to delays in the approval of the municipal permits.
What are the lessons to remember?
- If you have already launched the construction of projects which will be kept for rental purposes – and not sold as stocks – check if the significant costs incurred to date are eligible for the rate of 10 %, in accordance with the eligibility period.
- Redouble efforts to ensure the accuracy of registers and accounting. You will need to record all the eligible costs for housing projects intended for the rental carried out for yourself. So that your requests are more easily accepted in the future and you do not lose money inadvertently, dwell on details today.
2. The Government intends to restrict the purchase and acquisition of existing single -family houses by very large institutional investors.
What’s new? In order to rebalance the supply and demand in the face of the worsening of the housing crisis in Canada, the federal government is trying to facilitate access to property and rental by announcing its intention to restrict the purchase of unifamilial houses by certain investors. This approach could be akin to the current “ban on foreign buyers” targeting Canadian residential real estate.
-What could be the repercussions? This approach used by the government to deal with the financialization of housing should reduce the wars of purchasing and auction on the unified houses for sale. It aims to improve the affordability of housing in general. That said, we could also observe an increase in house purchases if large companies decided to act before the entry into force of the restrictions.
What are the lessons to remember?
- Monitor the additional details on the impact that these restrictions may have on institutional investors when filing the economic statement in the fall of 2024 by the government. Ideally, this update will include a clear definition of what constitutes “major institutional investors” and entities that will be part of this category in the future.
- If you are an institutional investor, you may need to carefully reassess the composition of your real estate assets. The same goes for the possible postponement of the sale of existing residential buildings given the emerging restrictions affecting the property.
- If you are a residential land owner, determine if you should apply for a zoning change in favor of a commercial, mixed or other category zoning in addition to residential zoning, which could attract important companies.
- Overall, think about how this decision could increase demand for commercial buildings or mixed use among major institutional investors, and how you could take advantage of this multitude of possibilities.
3. The abolition of TPS and HST on the accommodation expressly built for rental could stimulate activity while reducing the cost of the building.
What’s new? This incentive is in fact prior to the federal budget of 2024, but it is closely linked to current reality. In September 2023, the federal government announced the adoption of a law aimed at improving the reimbursement of the GST for new housing constructed expressly for rental.
What could be the repercussions? The increase in TPS reimbursement for rental buildings of 36 % to 100 % and the abolition of the gradual elimination thresholds for the reimbursement of the GST for the accommodation projects constructed expressly for the rental apply to construction sites carried out between September 14, 2023 and December 31, 2030. The project must be completed no later than 31 December 2035. New constructed expressly for rental, which increased from 36 % to 100 %, without progressive elimination threshold or limits as to the amount of the reimbursement.
The reimbursement of the TPS for new previous rental buildings has a gradual elimination threshold for eligible homes whose value is between $ 350,000 and $ 450,000 and is completely eliminated for housing whose value is $ 450,000 or more. This measurement represents an important incentive for real estate promoters who seek to build a larger number of apartments, Residences for elderly people expressly built for long -term rental.
What are the lessons to remember?
- Bill C -56 also widens the right to this TPS reimbursement to public service organizations (the “OSP”) which were right there if they were eligible for the purposes of reimbursement for OSP. If you are eligible as a public service organization, you should examine the value of this new reimbursement and determine if it would be more advantageous for you, since you now have the possibility of choosing the most advantageous of the two.
- If you are an investor or a promoter, given the current high real estate costs, it may be the right time to build more apartments, students’ accommodation and residences for elderly people built specifically for long -term rental purposes in order to take advantage of the unlimited value of the amount of the discount.
- Promoters should consider construction projects in the provinces which have also established similar improvement reimbursements for rental buildings for the provincial TVH portion. Subject to compliance with requirements, these provinces include Ontario, New Scotland, Ile – Du -Prince – Edouard and Terre – Et – Labrador.
