The Liberal Party announced its plan to address the affordability crisis, calling it “Canada’s most ambitious housing plan since the Second World War.” The plan aims to increase the rate of residential housing construction to 500,000 units per year over the next decade.
The key components of the plan include:
- Build Canada Homes (BCH): BCH will act as a developer to build affordable housing at scale, including on public lands. It will also provide over $25 billion in financing to prefabricated home builders in Canada. Additionally, BCH will provide $10 billion in low-cost financing and capital to affordable home builders
- Catalyzing the Housing Industry: The plan aims to cut municipal development charges in half for multi-unit residential housing while working with provinces and territories to keep municipalities whole. It will reintroduce a tax incentive from the 1970s, the Multiple Unit Residential Building (MURB) program, to encourage individuals to invest in rental housing. The plan also includes facilitating the conversion of existing structures into affordable housing units and reducing housing bureaucracy, zoning restrictions, and other red tape—allowing builders to navigate one housing market instead of thirteen.
- Eliminating the GST for First-Time Homebuyers: To make housing more affordable, the plan will eliminate the Goods and Services Tax (GST) for first-time homebuyers on homes priced at or below $1 million.
All affordable housing programs at CMHC will be moved to BCH. However, it remains unclear whether this includes the Apartment Rental Financing Program. While this program relies on outsourced underwriting and servicing, it also benefits from CMHC’s expertise in multifamily mortgage insurance underwriting—something that cannot be easily replaced.
What would be helpful is a clearer outline of how the plan would streamline overlaps between Canada Lands, CMHC, and the Department of Housing, Infrastructure, and Communities while establishing clear accountability across these entities.
The plan relies on modular development to reduce costs and improve efficiency in constructing new rental units. While modular development offers many benefits, it also comes with challenges, including transportation, logistics, regulatory hurdles, and limited design flexibility.
The plan calls for BCH to “issue bulk orders of units from manufacturers to create sustained demand.” This allows for the prefab plants to operate more efficiently, but managing the resulting inventory will be a challenge. Unused units cannot easily be repurposed for other sites unless the government plans to construct cookie-cutter buildings.
Whoever is tasked with cutting development charges (DCs) in half will find themselves in a political quagmire. DCs are used more frequently in Ontario and BC and are charged at the municipal level. If this proposal moves forward, municipalities—especially those in lower-fee jurisdictions—may have an incentive to raise these fees.
Additionally, if DCs are cut, what prevents municipalities from offsetting the loss by increasing community benefit charges? What’s needed is wholesale reform of the municipal financing system. Otherwise, this could turn into a game of whack-a-mole.
Like the tax treatment prior to 1972, the incentive for a MURB (Multi-Unit Residential Building) investment stemmed from the ability to defer taxes. Over the course of this tax incentive, the program underwent changes that limited its tax benefits for investors. It will be interesting to see which version of the program the Liberal plan settles on.
A second challenge will be ensuring investor protection. The MURB program is delivered as a securities offering, and investors in the previous program faced significant losses when some MURB promoters declared bankruptcy.
The plan calls for the reduction or elimination of the GST on homes priced up to $1 million for first-time home buyers. This is an issue that homebuilders have been highlighting for some time. According to CMHC, 55 per cent of homebuyers in 2024 were first-time buyers. I suspect the government imposed this restriction to prevent people from benefiting from this incentive and then renting out their existing home.
While this plan sets ambitious targets, it relies on the creation of a new government entity that has no internal expertise in property development. Furthermore, while creating new modular housing facilities may improve productivity in the building sector, there has been no successful track record of this approach in Canada. A substantial amount of money is being thrown around, with little in the way of a detailed road map on how this can be successfully executed.
Independent Opinion
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