The federal government said Thursday it will eliminate the GST on the construction of new rental apartments immediately in an effort to make housing more affordable.

Reporters at the Liberal caucus retreat in London, Ont., were told that the measure is one of a number aimed at bringing down the cost of living that will be announced later in the day.

The announcement will be made by Prime Minister Justin Trudeau and Deputy Prime Minister and Finance Minister Chrystia Freeland.

The NDP, which has been calling for the federal portion of the GST/HST to be removed from new rental housing, welcomed the move but criticized the Liberals for taking so long to implement it.

These are actions that should have been taken months ago, NDP Leader Jagmeet Singh said in a media statement.

If they had removed the GST from new affordable rental buildings when we first called for it six months ago, we could have had an entire construction season to get more homes built.

Trudeau and his government have been under heavy pressure in recent months to offer a response to the housing shortage. That pressure increased late last month after the Liberal cabinet retreat in P.E.I. ended without an announcement of new measures to tackle the crisis.

On Wednesday in London, Ont., Trudeau announced that the city had become the first in Canada to reach a deal with his government under the Housing Accelerator Fund, first announced during the 2021 election campaign and introduced in the 2022 federal budget.

The fund allocates $4 billion until 2026-27 to prompt more homebuilding in cities. The deal will see London get $74 million in exchange for the city’s agreement to pursue a series of measures, including a change to local zoning rules that should make it easier to build more rental units.

According to federal and municipal officials, the agreement will result in the construction of 2,000 housing units over the next three years and will help build thousands more in the years after.

Poilievre says he’ll also cut GST

Shortly after the Liberals announced the tax change, Conservative Leader Pierre Poilievre said he would include his party’s version of the measure in legislation he plans to introduce when Parliament resumes on Monday.

The Conservatives’ approach to removing the GST from the construction of new rental homes, he said, would differ from the Liberal plan by targeting homes with rental prices below the local market average.

Justin Trudeau promised to do this eight years ago. Six years ago he said ‘just kidding, promise broken,’ and now this morning, just as he got wind this was going to be in my bill, he flip-flopped again, he said.

In the Liberal’s 2015 election platformm the party said it would encourage the construction of new rental housing by removing all GST on new capital investments in affordable rental housing.

The Liberal government abandoned that policy in 2017, saying there were better ways to increase affordability.

Speaking in Vancouver, Poilievre said his Building Homes, Not Bureaucracy Act would also withdraw federal infrastructure funding from municipalities that do not increase the number of new units and building permits by 15 per cent.

Municipalities that go beyond that threshold, he said, would be given a bonus to encourage faster permitting.

Poilievre also said his legislation would impose tax penalties on municipalities that block construction near transit stations.

The legislation would also require that 15 per cent of federally owned buildings be turned into affordable housing within 18 months of the bill’s passage.

Singh was critical of the Conservatives’ approach to housing, saying it helped build the current system that sees deep-pocketed investors get rich.

Last week at the Conservative convention, not one solution to deliver affordable housing was proposed. It’s clear where the Conservatives’ priorities lie, and it’s not helping hardworking Canadians, Singh said.

Housing gap remains high: CMHC report

Poilievre also criticized the Liberal government’s deal with London, saying the Housing Accelerator Fund is more like a decelerator fund because of how slow it has moved. He also questioned the value of London’s deal under the fund.

[Trudeau] said his announcement of $74 million would bring 2,000 homes in London, he said. They were already planning to build 6,000 so its actually less homes than the city was going to build.

London Mayor Josh Morgan’s office pushed back in a media statement, saying Poilievre had his numbers wrong.

Our current plan in London is to build 9,432 homes by 2027, the statement said. We anticipate this new funding will increase that figure to 11,619. As a result, we project the Housing Accelerator Fund will support the construction of an additional net new 2,187 units.

The Liberals’ announcement comes as the Canada Mortgage and Housing Corporation (CMHC) released a new report (new window) estimating how many units are required to make housing affordable again.

The CMHC Supply Gaps Estimate report (new window) said another 3.5 million housing units are required by 2030, over and above the number of units expected to be built by that time, in order to restore affordability to 2004 levels.