While the federal government has long been reluctant to improve the tax position of rental housing, the government recently made a small improvement for some investors who acquire property after November 20, 2018. That is an accelerated Capital Cost Allowance (CCA) for depreciable capital property, including rental buildings.
Instead of being able to claim 2 per cent CCA in the first year, a new owner can claim 6 per cent in certain circumstances. However, many owners cannot claim the full CCA in the first few years of owning a property because CCA cannot be used to create or increase a loss. In other words, while a property is losing money, CCA cannot be claimed at all.
CFAA has long sought an increase in the CCA rate for rental buildings. Besides seeking a higher CCA rate, CFAA has also sought other measures which would make the CCA more useful, such as the ability to pool assets so that CCA on one property can apply against income from another property, or the elimination of the rule preventing CCA from creating or increasing a loss.
In addition, we want to expand and clarify the ability to claim expensive building improvement work as repairs (rather than capital improvements), even though the work provides a better item for the building than the item that was replaced (e.g. replacing mid-efficiency boilers with high efficiency boilers).
We received a positive reaction from the Department of Finance officials we met to make that pitch, and have acquired support from the Minister of the Environment and Climate Change and the Minister of Natural Resources.
The meetings were organized by Robert McCreight of the Capital Hill Group, who is CFAA’s new lead external government relations person. We met the officials with Robert and with Len Farber, a consultant on tax policy, who was the General Director, Tax Policy Branch, at the Department of Finance from 1973 to 2005. Len’s unique insight has helped to hone our tax reform message, focusing on what stands the best chance of success.
All CFAA’s proposals should benefit many landlords or developers directly, and benefit all landlords and developers indirectly by making rental housing a more attractive investment.
All the proposals are pitched as ways of increasing housing supply in order to improve affordability. In doing so, CFAA is showing the government that by working with the rental industry through those measures, they will also be advancing their goals to address climate change, and to improve housing affordability conditions in Toronto, Vancouver and everywhere in Canada.
With a Federal election set to occur in October 2019, now is the best time to influence the parties’ election platforms. If the on-going CFAA direct membership drive continues to raise the necessary funding, CFAA will continue with Robert’s work throughout this summer and into the future, to solidify and advance CFAA’s total lobbying efforts.