Notice to Members: Association Action on Prohibition of Residential Property by Non-Canadians Act and Regulations

The purpose of this Notice is to update members on the Association’s actions, and the Government of Canada response thus far, regarding the Prohibition of Residential Property by Non-Canadians Act and its subsequent Regulations. CHBA, along with BILD GTA (given the extensive impact this Act is having in the GTA), have been engaging extensively together with government officials and pushing for rapid resolution.

Background

On December 21, Regulations on the Prohibition of Residential Property by Non-Canadians Act were released, with an unusual process that skipped the pre-publication period (skipping an important critical stakeholder engagement period that would have enabled stakeholders to review the details of the regulations and provide feedback for corrections before they become law). Without this pre-publication period the Regulations came into force immediately on January 1, for a period of two years. Although the Act as previously announced and as touted was supposed to prevent the purchase of housing units by non-Canadians, the Association and other stakeholders were shocked to see the final Regulations as published prohibited Canadian companies with more than 3% foreign ownership from buying vacant land for residential development, or purchasing properties with less than four units on them (hence inhibiting assembling parcels of land for multi-unit construction). This also precludes buying farmland to develop communities. Given that the regulation also prevented purchase of mixed-use-zoned land, even commercial developers have been very negatively affected.

The Association engaged with officials immediately to seek a resolution, and in the process learned that this addition of land to the Regulations was aimed at preventing foreign buyers from changing from buying housing units to buying land to build on, but the major unintended consequence is that as worded this has also directly affected the entire development industry, specifically builder/developers with partial foreign ownership, preventing them from buying or assembling land for the development. Note that this will not affect companies that are 100% Canadian owned.

Action-to-Date

In addition to informing our membership of these new and unforeseen Regulations, the Association immediately engaged to seek rapid resolution with the office of the federal Housing Minister, the office of the Finance Minister, and the leadership at CMHC.  These meetings  informed government officials of the massive negative impact these Regulations is having upon the home building industry not only from a housing supply perspective but also on the ability of builders and developers to continue doing business. Brought to their attention were specific examples provided to CHBA from across the country, and examples of the extreme impacts in the GTA as outlined directly by BILD GTA members.

Given the severity of the situation, the Association has been in continual  meetings with government officials since December 21, and has provided not only details on how this issue is affecting industry, but specific wording on how the Regulations should be rewritten to exempt the home building  and development industry in Canada from the Act. Throughout our engagement, the Association has underscored the need for immediate action to help quell the very problematic situation in which many of our members find themselves, which is causing development to stall, important development deals to fall through, and housing supply actions to be delayed or completely derailed.

Reaction from Government

The meetings with government officials have been productive, with the Association’s messages being well received, as the government has a stated priority of increasing housing supply and, to do so, doubling housing production. Clearly these Regulations inadvertently run counter to increasing housing supply. In these discussions, the Association has been assured of the government’s commitment to housing supply and hence that they are committed to addressing this unintended consequence on an accelerated timeline.

Accordingly, it is the Association’s understanding that the Government is planning to go for an accelerated revision of the Regulations through the Treasury Board process. The exact timing of that process cannot be provided at this time, other than to say that the Association is aware that there is extensive work going on with government officials on the Regulations both in terms of process for revision and in terms of wording.

The Association will continue to push for full resolution on his issue and provide updates to the membership as they come. As the government issues formal notices on this issue, we will share both the notices and our assessment.  It is expected that there will indeed be a resolution to the situation, but every day between now and that resolution is very problematic for industry, and housing supply—we will continue to impress on officials the magnitude of this problem and the need for resolution as rapidly as possible.