Every fall the House of Commons Standing Committee on Finance holds public consultations across the country asking for input from Canadians on important issues facing the nation. A theme is usually adopted so that presenters can focus their input.
This year, the Canadian Real Estate Association made a presentation to the federal government that discussed enhancing national productivity by addressing high taxes, industry regulations and overly-conservative capital market players.
CREA said Canada is not leveraging its wealth to optimize or maintain its competitive advantage. CREA suggested changes to the Income Tax Act to create more investment in real property, especially property held by small investors.
Apartment vacancy rates are sitting at historically low levels in Winnipeg, so anything done to create a greater supply of rental properties through renewing existing units or building new units is desirable and necessary. What CREA is advocating will free owners from retaining unproductive and deteriorating properties because of the existing unfavourable taxes imposed upon them.
There are wider implications for the entire housing market because of the dearth of affordable apartment units — more pressure is exerted on the resale housing market where supply is unable to meet demand.
According to the following CREA article, housing can help improve Canadian productivity:
The Canadian Real Estate Association has told the Standing Committee on Finance that a change in tax rules to allow for investment in real rental properties would help improve Canada's international competitiveness.
“The Minister has spoken about a pro-growth strategy,” said CREA CEO Pierre Beauchamp in his presentation to the House of Commons committee on October 18.
“He has talked about liberating the forces of investment as a key to economic competitiveness. Our proposal is a natural component of such a strategy. It has the potential to help revitalize our communities and contribute to wider economic prosperity.”
The specific CREA proposal presented to the Standing Committee involves the deferral of capital gains tax when an investment property is sold and the proceeds of the sale are reinvested in another property within one year.
“Households can move their furniture and belongings, including their stocks and bonds, but not their real estate investments without substantial tax consequences” Pierre Beauchamp added.
The CREA CEO said Canada is not leveraging its wealth to maintain its capital advantage.
“Our proposal responds to those issues,” explained Beauchamp. “Reinvestment in income property is an effective means to leverage some of this wealth to provide the quality environments that are required to sustain economic prosperity.”
The CREA CEO told House of Commons committee members the only criticism of the rollover concept is potential losses the federal treasury may report because of deferred tax revenues.
“But please note. This is a deferral and not foregone revenue,” Beauchamp added.
In making the annual pre-budget submission to the Finance Committee, CREA also called for an adjustment to the successful Home Buyers’ Plan to reflect market realities.
“We are asking this committee to recommend a maximum loan amount be raised from $20,000 to $25,000 to account for inflation,” Beauchamp said.
“These limits were set back in 1992 and should be adjusted every five years,” he added.
According to CREA statistics, the Home Buyers’ Plan has helped more than 1.5-million Canadians finance the down payment for a first home since it was created in 1992.
(Note: The Winnipeg Real Estate Board is one of the 18 participants in Construct Manitoba being held at the Winnipeg Convention Centre on November 8 and 9. Its commercial division is holding a free session on November 8 from 8:30 to 10 a.m. The session features a panel speaking on commercial real estate in Manitoba. The division welcomes questions after the presentations as well as discussions on CREA’s proposal to allow capital gains deferrals on income property.)