2024 Federal Budget analysis

2024 Federal Budget analysis

On April 16, 2024,

increases the capital gains inclusion rate from 1/2 to 2/3, effective June 25, 2024 (up to $250,000 of annual gains for individuals will continue to benefit from the 1/2 inclusion rate)

raises the lifetime capital gains exemption to $1.25 million and introduces a new 1/3 inclusion rate for up to $2 million of certain capital gains realized by entrepreneurs

confirms previously announced alternative minimum tax proposals effective January 1, 2024, but softens the impact of these proposals on charitable donations

provides design and implementation details for the clean electricity investment tax credit

introduces accelerated capital cost allowance (CCA) for, and relief from interest deductibility limitations for debt incurred to fund the construction of, certain purpose-built rental housing

provides immediate expensing for the cost of certain patents and computer equipment and software

gives the Canada Revenue Agency (CRA) additional information gathering powers

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CAPITAL GAIN TAXES:

The following rates will apply to capital gains earned by individuals in excess of the $250,000 threshold who are subject to the top marginal income tax rate:

- For gains earned before June 25, 2024, and up to $250,000 thereafter: 16.50% (federal), 26.76% (Ontario).

- For the portion of gains in excess of $250,000 after June 24, 2024: 22.00% (federal), 35.69% (Ontario).

The budget proposes to increase the LCGE on eligible capital gains from $1,016,836 to $1,250,000 for dispositions that occur after June 24, 2024. The indexing of the LCGE to inflation will resume in 2026.

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Deduction for Tradespeople’s Travel Expenses

Eligible tradespeople and apprentices in the construction industry are currently able to deduct up to $4,000 in eligible travel and relocation expenses per year by claiming the labour mobility deduction for tradespeople. A private member’s bill (Bill C-241) was introduced to enact an alternative deduction for certain travel expenses of tradespeople in the construction industry, with no cap on expenses, retroactive to the 2022 taxation year.

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BUDGET 2024 for HOUSING:

The new Public Lands for Homes Plan, as unveiled in Budget 2024, outlines several key initiatives to facilitate the construction of 250,000 new homes by 2031 using federal lands. The plan includes the following items:

1. The federal government will utilize various strategies to transform public lands into housing, such as leasing, acquiring additional lands for housing, and maintaining ownership when feasible. This approach helps keep homes affordable indefinitely by allowing builders to lease land rather than purchasing it, reducing upfront capital costs.

2. A rapid assessment of all federal lands and properties will be conducted to quickly pinpoint potential sites for housing development.

3. Federal departments and agencies will be required to nominate specific land parcels to meet predefined targets for housing development.

4. Consultations with municipal, provincial, and private sector partners will be organized to select the most suitable lands for housing projects.

5. A new Public Land Bank will be established, listing available lands, with a launch set before fall 2024 to speed up building projects on public lands.

6. The introduction of a new geo-spatial mapping tool will aid homebuilders in accessing and assessing public lands for potential development.

7. New legislation will be proposed to streamline the process of acquiring and utilizing public lands for housing, in collaboration with other levels of government.

8. Budget 2024 allocates $5 million over three years, starting in 2024-25, to revamp the Canada Lands Company, enhancing its ability to develop more housing on public lands. This includes cutting approval times in half, starting redevelopment processes early, and bundling multiple properties for transfer.

9. Leasing options, including long-term, low-cost leases, will be provided to housing providers, allowing them to focus financial resources on construction rather than land acquisition.

10. The transformation of underused government offices into multi-use properties and the transfer of land to Canada Lands Company for $1, when feasible, to facilitate more affordable housing projects.

11. The redevelopment of surplus, underutilized, or actively used properties owned by Crown corporations for housing.

12. An additional $4 million over two years, starting in 2024-25, will fund new modular housing projects by Canada Lands Company at four specified sites, including Downsview in Toronto.

13. A $1.8 million provision over two years, starting in 2024-25, will support the creation of a Public Lands Action Council Secretariat by the Privy Council Office to oversee and coordinate housing development on public lands.

These measures are designed to make housing more accessible and affordable, notably benefiting non-profit housing providers like Housing Society Co., which plans to build an apartment complex in Edmonton with at least 30 percent of its units designated as affordable. By leasing land from the federal government at minimal initial costs, Housing Society Co. can proceed with the project and offer more affordable rents.

14. Utilization of National Defence Lands:

- National Defence owns 622 properties across all provinces and territories, totaling 2.2 million hectares.

- Many of these properties are underused and are located in various cities and communities across Canada.

- There is potential to unlock these lands to build more homes not only for Canadian Armed Forces members but also for civilians.

15. Conversion of Underused Federal Offices:

- Following the shift to hybrid work models sparked by the pandemic, Public Services and Procurement Canada has identified that approximately 50% of their 6 million square meters of office space is underused or entirely vacant.

- Considering Canada’s housing shortage, these spaces represent a significant opportunity for conversion into housing.

16. Support for Building Rental Apartments:

- Building rental homes can be financially challenging, especially with high interest rates and land prices.

- The government’s low-cost construction financing programs are crucial for helping more apartment buildings commence construction.

17. Expansion of the Apartment Construction Loan Program:

- Budget 2024 proposes an additional $15 billion in new loan funding starting in 2025-26 for the Apartment Construction Loan Program.

- This increase will bring the program's total funding to over $55 billion.

- The additional funding is expected to support the construction of more than 30,000 new homes across Canada.

- By 2031-32, the program aims to have supported the construction of over 131,000 new homes.

- At least $100 million of the new funding will be specifically allocated to building homes above existing shops and businesses in densely populated urban areas, particularly where land is scarce.

These steps are part of a broader strategy to address the housing supply shortage and make more efficient use of federal properties, contributing positively to community development and the economy.

18. Canada Housing Infrastructure Fund:

- A $6 billion investment over 10 years, starting in 2024-25, will be made to Infrastructure Canada to establish the Canada Housing Infrastructure Fund.

- This Fund will focus on accelerating the construction and upgrading of essential infrastructure such as water, wastewater, stormwater, and solid waste systems. These upgrades are essential for supporting new housing developments and enhancing densification.

19. Public Transit and Housing Policy Integration:

- Communities that wish to access funding from the new permanent public transit fund must take actions to increase housing supply by:

- Eliminating all mandatory minimum parking requirements within 800 meters of a high-frequency transit line.

- Allowing high-density housing within 800 meters of a high-frequency transit line and post-secondary institutions.

- A Housing Needs Assessment is required for all communities with a population greater than 30,000 to better understand and address local housing demands.

20. Innovation and Productivity in Residential Construction:

- The government is emphasizing the importance of innovation and productivity in the residential construction sector to build homes more efficiently.

21. Support for Innovative Construction:

- Over $600 million is allocated through the Affordable Housing Innovation Fund to promote innovative housing solutions.

- $300 million is provided through the Housing Supply Challenge to develop strategies to overcome barriers to housing supply.

- $191.8 million over seven years, plus an ongoing $7.1 million per year, will fund research and development in innovative construction materials and update national housing and building standards to promote low-carbon construction.

- $38 million is directed to the Green Construction through Wood program to encourage the use of wood-based technologies in construction.

- $13.5 million annually is dedicated to making National Building Codes freely accessible and modernizing these codes to facilitate internal trade and align standards across the country.

22. Additional Supports for Innovation:

- The Industrial Research Assistance Program supports Canadian small- and medium-sized enterprises in increasing their capacity for innovation and commercializing new ideas.

- The Regional Economic Growth through Innovation program aids businesses in scaling up and implementing new innovative technologies.

- The Strategic Innovation Fund attracts and enhances private investment in innovative projects across all regions and sectors of the Canadian economy.

These initiatives are designed to bolster the construction and availability of housing in Canada, focusing on infrastructure development, regulatory reforms to promote densification, and the adoption of innovative construction methods.

Budget 2024 introduces several measures aimed at supporting homebuilders, homeowners, and mortgage borrowers. Here is a breakdown of these initiatives itemized:

23. GST Removal and Financing for Rental Projects:

- Building on previous measures that removed 100% of GST from new rental housing projects, further low-cost financing will be provided to advance more apartment building projects.

24. Foreign Credential Recognition Program Funding:

- Budget 2024 proposes to allocate $50 million over two years, starting in 2024-25, to Employment and Social Development Canada to enhance the Foreign Credential Recognition Program. This initiative aims to streamline the process for recognizing international qualifications in Canada, potentially expanding the workforce in sectors such as construction.

25. Canadian Mortgage Charter:

- The charter outlines several expectations for banks concerning mortgage relief for borrowers facing financial difficulties:

- Proactively contact homeowners well in advance (at least 24 months before) of mortgage renewal to discuss renewal and refinancing options.

- Offer temporary and, where appropriate, permanent extensions of the amortization period for at-risk mortgage holders.

- Provide detailed information about the additional interest incurred due to amortization extensions.

- Waive fees and costs related to relief measures or actions taken by mortgage holders to shorten their amortization periods as their financial situation improves.

- Allow borrowers to switch lenders at mortgage renewal without requalifying under the insured minimum qualifying rate.

- Enable at-risk borrowers to make lump-sum payments to prevent negative amortization or sell their principal residence without prepayment penalties.

- Ensure that no interest on interest is charged if mortgage relief measures lead to a period of negative amortization.

26. Consultation on Income Verification Tool:

- The government plans to consult with the mortgage industry to explore the feasibility of implementing a new tool through the Canada Revenue Agency. This tool would complement existing strategies used by financial institutions to verify borrower income for mortgage applications.

27. Asylum Claimants by Top Countries of Citizenship in 2023:

- The following are the top five countries by the number of asylum claims in Canada in 2023:

- Mexico: 23,910 claims

- India: 11,285 claims

- Nigeria: 9,155 claims

- Türkiye: 6,385 claims

- Colombia: 6,040 claims

These measures aim to support the housing market by easing financial burdens on homebuilders and homeowners, enhancing workforce integration through credential recognition, and improving mortgage and credit assessment practices.