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Developers get cheap leases for home construction in Canada

(Bloomberg) – Premier Justin TrudeauCanada’s government will offer cheap leases of public land to developers and encourage factory-built housing as part of what it calls a “historic” plan to ease Canada’s housing crisis.

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Companies that agree to build affordable housing will have access to “surplus, underutilized and vacant land” owned by the public, the government said, while providing few specific details. The Prime Minister’s housing strategy, published on Friday, also includes low-interest loans for homeowners looking to add basement suites or street housing to their properties.

The strategy should allow the country to build about 3.9 million homes by 2031, Trudeau said at a news conference. That would exceed the 3.5 million the Smart Prosperity Institute says is needed — if provinces and local governments join the initiative with “serious ambition,” Housing Minister Sean Fraser said in an interview.

There were two other moments in Canada’s history when the country faced a housing shortage close to the current scale, Fraser said. One was after World War II, when soldiers returned and displaced people flooded the country; the second was a generation later, as baby boomers came of age and needed to accommodate their growing families.

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In both cases, the country has taken action to expand its housing stock. But after decades of underinvestment, combined with a growing population, Canada may be facing its biggest housing supply challenge yet, according to Fraser.

The federal government is the nation’s largest landowner, but Fraser said it chooses to lease land rather than sell it to keep it public and maintain more control over what is built. The government says it will work with housebuilders and housing providers to build “at every possible location in the public portfolio”.

“This is the most ambitious housing plan in Canadian history,” Fraser said.

But many parts of the housing strategy require support from provinces and cities, including the use of the land they own. Some premiers, including Quebec’s François Legault, have already opposed encroachments on their jurisdiction.

A statement from Conservative Leader Pierre Poilievre’s office pointed to Canada’s record on housing construction under Trudeau, including that it now takes 25 years to save for a down payment in Toronto, according to the National Bank. Poilievre has promised to encourage cities to build more housing and punish those who don’t.

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The government plan also includes an “industrial strategy for housing construction”, with a focus on prefabricated homes, including 3D printed properties. This part of the strategy includes a previously announced design catalog to accelerate construction and setting aside C$500 million ($363 million) in low-cost loans for innovative apartment projects.

Here are some other new measures in the housing plan:

  • Temporarily increasing the tax rate for the capital cost allowance from 4% to 10% to increase builders’ returns

  • Creating a new program that gives homeowners access to up to C$40,000 in low-interest loans to add a second suite to their homes

  • Adding C$50 million to a foreign credential recognition program to recognize the expertise of newcomers in the housing industry and boosting training and internship programs to help Canadians join the skilled trades

  • Advising on a plan to limit the purchase and acquisition of existing single-family homes by large corporate investors

  • Consultation with the mortgage industry on making available a tool through the Canada Revenue Agency to verify the income of mortgage borrowers in an effort to combat fraud

  • Investing an additional $1 billion over four years in a program called Reaching Home, which provides funding to communities to help address homelessness

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Trudeau made a series of announcements ahead of the April 16 government budget related to helping younger Canadians with high housing costs. The lack of affordability has become a major political issue, causing Trudeau’s popularity to decline among voters under 40.

Previously announced measures in the housing strategy give starters in the housing market a 30-year repayment term for mortgages on new-build homes and a fund for provinces to help pay for infrastructure if they agree to allow more compact housing.

–With help from Mathieu Dion and Jay Zhao-Murray.

(Adds a plan for a consultation on the ban on private equity purchasing single-family homes.)

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