N.L. Liberals in full support of Ottawa tax breaks for apartment construction

The federal governmentwants to drop the tax on the construction of new apartment complexes to address a growing housing shortage across the country, and Newfoundland and Labrador was one of the first province's to back the plan.

Prime Minister Justin Trudeau announced Thursday a series of measures to deal with a widening housing crisis and other cost-of-living challenges such as higher grocery prices.

Removing the five per cent federal goods and services tax on the construction of new rental apartments is one of the planks in Trudeau's plan, and he encouraged provinces to join the effort by removing provincial harmonized sales taxes.

On Friday, Finance Minister Siobhan Coadycalled reporters to Confederation Building to announce the provincial government was in full support.

"We want to encourage more rental units," said Coady. "This is one way we encourage more rental units."

There's a 15 per cent HSTin Newfoundland and Labrador.It's a blended levy, with five per cent going to Ottawa, and 10 per cent going to the province.

Opposition politicians and the construction industry have been lobbying for a tax break to stimulate the construction of apartments.

"You're going to save 15 per cent on all your goods and services. So it's a significant stimulus to the opportunity of building new rental units. And that's what we need right now. We need more rental units," said Coady.

The federal Liberals first proposed such a tax cut in 2015but failed to deliver. But now that interest rates have surged, and governments are under pressure to address the housing challenge,the ideahas resurfaced.

"The provincial government equally wants to ensure that we have more new rental units in the province.We're willing to make those investments," said Coady.

Coady couldn'tsay how much tax revenue would be lost through thetax breakbut said it's "not overly material" for a province with a budget of nearly $10 billion.

She said the tax break would be in addition to the $70 million the government budgeted this year to construct 850 new public housing units throughout the province.

The federal plan proposes a tax break on the goods and services needed to construct apartment buildings consisting of at least four units.

The construction of two-apartment homes and basement apartments would not qualify. Critics call the exceptionsa shortcoming, since apartment complexes are rarely constructed in the province because of the high cost of land, labour and materials.

And some question whether the tax breaks will actually curtail sharply increasing rents.

"It will make, no doubt, building the properties affordable, but will those savings necessarily [translate]intomore affordable rents? I'm concerned it won't," said Jim Dinn, St. John's Centre MHA and leader of the provincial New Democrats.

• Trudeau announces new measures to deal with housing, grocery prices

Dinnwelcomed the tax cut for apartment constructionbut he said more needs to be done.

He said there should be an emphasis on supporting non-profit housing groups in order to keep rents affordable, making more land available for construction, and releasing more money from the national housing strategy.

Dinn said there's growing evidence that the housing crisis in the province is worsening, with shelters turning away people and some people resorting to living in tents in city parks.

Dinn told astory of one property owner who discovered someone living in their backyard shed.

"We need to go further than tax breaks," he said.

"Let's get on with some serious issues or we're going to see more people using bus shelters for their home and people living in tents."

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