Extend GST housing rebate to seniors who want to downsize, report recommends

OTTAWA — The federal government’s GST rebate on new homes should be extended to seniors who want to downsize, a new report says, to help boost the supply and cut the price of family homes. The report, released Tuesday by the Ottawa-based Missing Middle Initiative, says that Canada’s housing crisis is being partly fuelled by market bottlenecks preventing seniors from downsizing. The document says that Canada’s housing supply problems include a lack of smaller homes with access to seniors’ preferred facilities and services, which creates disincentives for empty nesters to downsize. That leaves many seniors with homes that are larger than they need, while further restricting the supply of family homes and raising prices. This under-appreciated piece of Canada’s housing crisis is exacerbated by high transaction costs, such as the GST and land-transfer taxes, that create further disincentives for seniors to downsize, the report adds. Eliminating these transaction costs would help spur more downsizing, the report says. “Not only would this help increase the supply of seniors’ friendly housing (but) would also free up larger, child-friendly homes for the next generation of families.” Paul Smetanin, the president of the Canadian Centre for Economic Analysis, said he agrees with the report’s conclusions and that Canada’s current housing problems were completely predictable and the product of a series of government policy and municipal planning failures. Smetanin said his company estimates that there are 4.4 million empty rooms in Ontario alone, in part because of the empty nesters who can’t downsize. Those empty rooms are the equivalent to what would normally take more than 20 years to build, he said. “It really burns my chops.” Canada’s housing crisis has been a high-profile and far-reaching problem in recent years. As the population has increased, particularly in urban areas, demand for both home purchases and rentals has soared, leaving many Canadians under-housed or even homeless. The federal government’s response in recent months has been to try to make homes more affordable while increasing supply, including greater reliance on pre-fabricated homes. In March, the federal government announced that it would eliminate the GST for first-time homebuyers who purchased homes for $1 million or less, although it is not yet clear if that will bring down home prices . The Missing Middle Initiative report also found that homeownership rates are dropping for those under the age of 40 as they are being priced out of many markets. Many young families are also facing a “second-time homebuyers” barrier in that they own a small home, often a one-bedroom residence, but they have been priced out of transitioning to something that meets their growing family’s needs. The Missing Middle Initiative, launched late last year and housed out of the University of Ottawa, was designed to help support Canada’s urban middle class and analyze the barriers preventing young Canadians and new families from entering the middle class. National Post

• Canada's housing starts stuck at 1970s levels, while population growth has tripled, study finds
• Mortgage borrowers will foot the bill for government GST cuts and other rebates

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