Relief for Apartment Owners: Justin Trudeau’s government retracted a threat to impose a new tax regime on real estate investment trusts in Canada due to industry opposition.
Canadian Apartment REITs’ Tax Treatment Changes
- The finance department stated no changes to the tax treatment of REITs are currently being considered.
- This move removes a risk that has been affecting Canadian apartment REITs for over two years.
- In March 2022, Trudeau struck a power-sharing deal with the opposition New Democratic Party to tackle the “financialization of the housing market.”
- The Liberals had promised to review tax rules and curb excessive profits of large residential property owners in the 2021 election.
- A change to the REIT structure, requiring corporate income tax, could have made REITs less attractive to investors.
Real Estate Industry’s Response to Government’s Renoviction Promise
- Real estate industry argues uncertainty from government pledge raises capital cost and hinders housing supply development.
- Finance department acknowledges REITs as a critical investment channel.
- Renovictions refer to evicting tenants for apartment improvements, allowing higher rent charges.