May 14, 2024 Federal Budget 2024: Addressing Housing Affordability and Economic Equity 

The 2024 Federal Budget, as unveiled by Finance Minister Chrystia Freeland in April, marks a significant shift toward addressing the concerns of younger generations with substantial measures aimed at improving housing affordability and availability. With the problem well established, this Budget outlines the government’s plan to solve it. 

However, how effective are the measures, and will they be enough? With the help of Director of Advisory Garde MacDonald, we provide an overview of the key Budget highlights, with a particular focus on initiatives related to housing. 

Major Budget Initiatives 

The government's 2024 Budget announcement includes several key initiatives centred around economic justice, housing, and fiscal responsibility: 

• Fiscal Goals: Despite a $40 billion deficit, the government commits to $53 billion in new spending, targeting economic justice for younger generations. 
• Housing Initiatives: With an allocation of $8.5 billion, the Budget aims to facilitate the construction of nearly 3.9 million homes by 2031, through measures such as: 
  • Increasing the capital cost allowance rate for apartment buildings to stimulate more construction. 
  • Extending mortgage amortization periods to 30 years for first-time homebuyers focusing on new builds. 
  • Providing public lands for housing projects and leasing these lands to developers at favourable terms. 
  • Expanding the housing accelerator fund to enable municipalities to increase the pace of home construction. 
  • Offering financial support for the development and maintenance of affordable rental housing. 
• Tax Measures: A notable increase in the taxable portion of capital gains is proposed to fund these initiatives, expected to generate nearly $20 billion over the next five years. 
• Economic Projections: The budget projects a reduction in the deficit, forecasting $39.8 billion for the current fiscal year, down slightly from last year. 
• Generational Fairness: An additional $2.6 billion is designated for reducing education costs and enhancing job opportunities for younger demographics. 
• Support for Small Businesses and Students: Initiatives such as the Canada Carbon Rebate for Small Businesses and improved financial aid for students, reflecting housing costs, are also included. 

Housing Availability and Affordability 

The Budget presents a detailed plan to significantly increase both the availability and affordability of housing, underscoring a comprehensive strategy to enhance housing options:  

• Public Lands for Homes Plan: This initiative plans for the creation of 250,000 new homes by 2031 by converting underused federal lands, such as empty office buildings and parking lots, into residential areas. About 50% of federal office spaces are slated for conversion into housing, a move expected to yield significant savings and investment in the housing sector. A plan to repurpose post office properties for housing development is also included.  
• National Defence Lands: The redevelopment of suitable military properties to accommodate civilian housing, along with the divestment of surplus properties. 
• Taxing Vacant Lands: An introduction of a tax on vacant residentially zoned land to encourage their development. 
• Apartment Construction Loan Program: A substantial $15 billion investment to support the construction of 30,000 new homes. 
• Modular Housing: Promoting the all-season construction of homes through the expansion of modular housing technologies. 
• Housing Accelerator Fund: An additional $400 million investment to support the construction of 12,000 more homes. 

Implications for Developers and Homebuyers 

The Budget’s pronounced emphasis on housing represents a significant commitment by the government to engage actively in resolving the housing affordability crisis. As Director of Advisory Garde MacDonald notes, "The new Federal Budget is encouraging in the sense it signals the continued involvement of the government in the creation of new housing." However, he cautions, "There is a huge time lag in creating new housing, and the plans contained in the Budget will take five to 10 years to come to fruition." This underscores the long-term nature of these initiatives, which, while promising, will not yield much-needed immediate relief. 

MacDonald also highlighted an innovative approach that could reshape housing development: "One exciting aspect of the Budget is the utilization of federally owned, underutilized lands." This strategy has the potential to significantly reduce land costs, which could lead to more affordable housing options. Yet, he points out the ongoing challenges exist beyond the land itself. "Elevated construction costs and a lack of labour force remain issues for delivering new housing." These factors continue to pose substantial obstacles to the rapid development of affordable homes. 

Moreover, MacDonald identified a critical concern regarding the accessibility of federal funds. "A potential problem within the Federal Budget is the limited access to federal funds unless certain conditions are met by developers." He warns that "these are additional hurdles and will create more barriers for many private developers, furthering the existing issues that hinder housing creation." This could potentially slow down the pace at which new housing is developed, complicating the government's goals. 

In sum, while the Budget lays a foundational path toward addressing the housing shortage, the effectiveness of these measures will be tested by implementation challenges and existing market dynamics. The government's involvement is a positive step, but real progress will depend on overcoming the practical and logistical hurdles that MacDonald outlines. 

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