|
|
|
HST is a Lose-Lose Situation for the Apartment Industry
June 2010
| *V-Report Sponsors |
 |
| *Not affiliated with V-Report Speakers |
| |
|
|
|
John Dickie, President of the
Canadian Federation of Apartment Associations |
|
|
By Hayley Mitchell
John Dickie is the President of the Canadian Federation of Apartment Associations (CFAA), which represents the owners and managers of close to one million residential rental suites in Canada, through 17 associations across Canada. CFAA is the sole national voice for Canada’s $40 billion private rental housing industry, which provides homes for more than seven million Canadians.
In the summer of 2010 the biggest issue facing landlords is the new HST coming into force in BC and Ontario on July 1.
The main effect of the HST on rental housing providers in Ontario and BC will be to increase operating and repair costs. The increase will be significant, say something in the order of $250 to $300 per year for the average apartment.
Besides reducing profitability, these cost increases will put upward pressure on rents of about $20 to $25 per month.
In the short term, Ontario’s rent control legislation (and BC’s) will prevent the cost increases from being passed through to most tenants.
Rental housing providers will be forced to manage the cost increases by reducing discretionary expenditures. Basically that means cutting back on maintenance and on building upgrades.
That will have a negative effect on tenant satisfaction, and on the quality of rental housing in Ontario and BC.
Besides cutting back on discretionary spending, there is only one other thing rental housing providers can do to mitigate the effect of the HST. That is to bargain down the before-tax costs of goods and services they buy, especially those that had a high PST component, since their suppliers will be receiving input tax credits for those goods and services. Such bargaining will reduce the impact of the HST somewhat, not eliminate it completely, nor even largely.
By their decision to bring in the HST, the Ontario and BC provincial governments sideswiped the rental housing industry.
In Ontario the government is giving transitional relief to homeowners and tenants, when it is homeowners and landlords who will pay the increased costs, rather than the tenants.
As an industry, rental housing providers certainly think that the transition could have been managed much better, particularly in Ontario, but also in BC.
The overall result will be negative to rental housing providers and negative to the quality of rental housing, which in turn is negative to tenants. For rental housing, the HST is a lose-lose proposition.
|
|
 |
| |
|
|
| |
| < Back |
|
|
|
| Copyright © Canadian Apartment Magazine. All rights reserved. |
|
|
|
|