Thread by @MikePMoffatt

Time for a thread on the new federal Conservative "Building Homes Not Bureaucracy Act" (Bill C-356).

The TL;DR version: This bill is an exceptionally weak response to the housing crisis, riddled with loopholes.

parl.ca/DocumentViewer…

I'm critical of this bill, but the CPC are doing 3 things here I think are good:

1. They note "permissions" as a bottleneck to getting housing built

2. They understand the importance of incentives

3. They wrote out their plan

All good things

But this plan is incredibly weak and would substantially *increase* federal bureaucracy.

First let's start with their GST plan on purpose-built rental. Unlike the gov't's plan, the Tory plan comes with the condition that "the average rent payable is below market rate".

Specifically, "that the average rent payable for a unit in the complex in which the unit is situated is or will be less than the market rate as determined by regulation for the market in which the unit is located"

So let's say you're building a 200-unit rental building in Guelph... a combination of studios, and 1-3 bedroom units, of different sq. ftage.

The federal government has to define and update what the "market rate" is for each of these units and assess which ones qualify.

How often would the government update these market rent figures? Would they make a distinction between number of bedrooms? Floor sizes? And how will they define the geography? (Neighbourhood? Municipality? CMA?)

This is just an absolute mess of red tape, creating uncertainty for builders and developers. What happens if market rents change between the time a building is planned, when shovels go in the ground, and when the building is complete?

Micromanagement at its worst.

The other important piece of the bill is this: "establish a target for the completion of new homes in high-cost cities that increases 15% every year and ties federal infrastructure funding allocated to high-cost cities to that target"

I get the logic here... municipalities, if they so choose, can find all kinds of creative ways to block housing. Placing a "completions" target incentivizes cities not to do that.

But there are some challenges here. First is that municipalities don't build homes - builders and developers do... home starts or completions can go up or down for reasons unrelated to municipal actions (like interest rates).

Cities have far from total control over outcomes.

Next is the target itself. The baseline for the 15% is calculated based of housing completions between April 1, 2023 and March 31, 2024.

There's a lot of year-to-year variability at the year-to-year level.

If an unusually high number of homes are built in a city in 2023, it'll be unlikely that you'll see 15% more built in 2024, no matter what the city does.

Similarly, if an unusually low number of homes are built in 2023, then that city's target will be laughably low.

Next, let's look at the list of cities itself. The target rules wouldn't apply to most Canadian cities, just the ones on this list.

Next, the choice of cities is incredibly odd. It leaves out a bunch that have some pretty severe housing shortages.

Since when are Burlington and Milton not "high cost cities"?

Finally, the way the target is designed creates all kinds of perverse incentives.

Imagine you're the builder of a large apartment, and whether or not you complete it by Christmas determines whether or not a city will hit their completions target.

This gives that builder/developer an absolutely massive amount of leverage to extract concessions from cities on other projects, by threatening to delay completions by a month or two.

The power imbalances created are highly problematic.

Finally, we should talk about what's not in the bill. While the bill correctly identifies "permissions" as a huge bottleneck to getting homes built, it's only one. A full housing plan needs to address all six of the major bottlenecks, shown below:

Some final thoughts: I think the core idea of the federal Conservative housing bill is sound. The feds do need to address red tape, micromanagement, perverse or missing incentives, etc.

The failure is in the design. It could be redesigned to be a good bill.

But as designed, the Tory bill fights micromanagement and redtape through... more micromanagement and red tape.

It fights bad incentives with more bad incentives.

And it exempts a large portion of the 905 from needing more housing supply, which is a... choice.

Now, onto the government's choice to do a sweeping removal of the GST on all purpose-built rental.

I think this person is onto something... it is a chance of approach for the federal government. They're not wrong.

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I see this change of approach as good. One of my biggest criticisms of how the federal government (and many other governments across Canada) have dealt with the housing crisis is through micromanagement, which has caused more problems than it has solved.

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Not to sound too much like @mattgurney or @Sean_Speer, but Canadian governments have overestimated their capacity to directly manage issues.

Instead of micromanagement, we're better off having clear, easy-to-follow and manage rules.

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In short, I am far more worried that complex rules and taxes will choke off our ability to build homes, causing unaffordability and homelessness.

Then I am that someone will build a luxury RENTAL unit and only pay 11 different taxes on it instead of 12.

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This describes the “government micromanagement as a cause of the housing crisis” better than I ever could

https://twitter.com/itsahousingtrap/status/1706343048077078725