Moore Stephens
Budget

Measures for the real estate and construction industry

A look back at the 2024 federal budget

The 2024 federal budget proposes initiatives to counter the housing crisis, and massive investments are planned through various programs. These measures are summarized below.

Most of the investments will require the Quebec government and municipalities to cooperate with the federal government, in particular by agreeing to soften zoning and plan approval rules, and to immediately freeze development charges for three (3) years.

An immediate impact on the sector

However, some measures will have an immediate or short-term impact on contractors in Quebec’s real estate and construction industry:

  • The increase in the capital gains tax inclusion rate from June 25, 2024 could lead to precipitous property sales before that date, especially for properties that were being considered for sale in the coming months;
  • The increase in capital cost allowance from 4% to 10% on buildings constructed for residential rental, based on the criteria that construction began after April 15, 2024 and the building is put into service before 2036;
  • The introduction of a new tax on vacant land, the details of which have yet to be defined.

In detail, the measures announced are as follows:

Building more housing

  • An investment of $5 million over three (3) years, starting in 2024-2025, to support a transformation of Canada Lands Company (CLC) to broaden its activities and enable it to promote the construction of more housing on public land;
  • Funding of $500M over five (5) years, starting in 2024-2025, to enable Public Services and Supply Canada to launch a new public land acquisition fund, which will purchase land from other levels of government to stimulate a sustainable supply of mixed housing;
    • Funding of $112.6M over five (5) years, starting in 2024-2025, and $4.3M per year thereafter, for Canada Mortgage and Housing Corporation (CMHC) to complement the Federal Land Initiative to make more federal land available to affordable housing providers.
  • To move ahead immediately with its Plan for the Residential Use of Public Land, the government is urgently releasing five (5) federal properties to be leased to housing providers for the construction of over 800 new homes;
  • Investment of $4M over two (2) years, starting in 2024-2025, to enable CLC to support new modular housing projects on four (4) sites.

Announcement that the government plans to introduce a new tax on vacant land in residential areas.

A newCanada Builds initiative, through which the federal government intends to leverage its $55B Apartment Building Loan Program to partner with provincial and territorial efforts to build more rental housing across the country.

Allocate an additional $400 million over four (4) years, starting in 2024-2025, to CMHC, to enhance the Housing Acceleration Fund. This funding will accelerate the construction of 12,000 new homes over the next three (3) years.

  • Pay $50 million over two (2) years, starting in 2024-2025, to Next Generation Manufacturing Canada (NGen) to accelerate the development of innovative technologies in the housing sector;
  • Provide $50 million over two (2) years, starting in 2024-2025, for Canada’s regional development agencies to support local, innovative housing solutions across the country;
  • Allocate at least $500 million through the Apartment Construction Loan Program to homebuilders using innovative construction techniques, such as modular housing, for new rental housing projects.

Introduce a temporary accelerated capital cost allowance rate of 10% for new qualifying rental housing projects for which construction begins on or after budget day, and into which tenants can move before January 1, 2036.

  • Pay $100M over two (2) years, starting in 2024-2025, to Employment and Social Development Canada for the following initiatives:
    • Funding of $90M over two years, starting in 2024-2025, for the apprenticeship service to help create internships with small and medium-sized businesses for apprentices.
    • Funding of $10M over two (2) years for the Red Seal Program, starting in 2024-2025, for the Skilled Trades Awareness and Preparation Program to encourage Canadians to explore and prepare for a career in the skilled trades.

Facilitating access to home ownership and rental property

  • The government strengthens Canada’s mortgage charter by making 30-year amortization mortgages available to first-time homebuyers. This new insured mortgage product will be available to first-time buyers from August 1, 2024.
  • Upcoming amendment to the Income Tax Act to increase the Home Buyers’ Plan (HBP) withdrawal limit from $35,000 to $60,000. The new higher limit would apply to first-time buyers after April 16, 2024;
  • Forthcoming amendment to the Income Tax Act to temporarily extend, for an additional three (3) years, the grace period during which owners are not required to repay amounts withdrawn from their RRSPs under the HBP. This extended grace period would apply to HBP participants who made their first withdrawal between January 1, 2022 and December 31, 2025. They will now be able to begin repaying their Home Buyers’ Plan withdrawals only as of the fifth year following the withdrawal.

Until January1, 2027.

Until January1, 2027.

The CRA will be tackling cases of non-compliance with tax rules in real estate transactions.

Other measures

  • The government intends to restrict the purchase and acquisition of existing single-family homes by very large institutional investors.
  • Relaxation of eligibility criteria for GST exemption on new housing projects.
    • In September 2023, the Department of Finance Canada announced an enhanced GST rebate for new rental properties built specifically for long-term rental. This enhancement will increase the rebate from 36% to 100% of the GST payable on the construction of a new rental building for new projects that began after September 14 and run until December 31, 2030.
    • In addition, this measure abolishes the phase-out of the GST rebate for homes with a fair market value in excess of $350,000. The maximum reimbursement is $25,000 for two (2) bedroom units.
    • Eligible new units must have at least four (4) complete apartments or 10 bedrooms (student housing, seniors’ residence, disabled persons’ residence).
    • To be eligible for the increased rebate, the rental property must be used as an individual’s primary place of residence for a lease of at least 12 months. Universities and other educational institutions did not qualify for this bonus because of the temporary nature of student housing.
    • The budget proposes to relax the rebate conditions for new student housing so that it will qualify for the enhanced new rental property rebate for educational institutions that operate on a not-for-profit basis.

 

Contact our team of real estate and construction specialists.

Benoit Vallée, CPA
Jean-Philippe Binette, M. Tax.
Olivier Rénald, CPA

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