Starlight Developments has joined a list of developers moving forward with new apartment projects, which had been on hold or faced cancellation, following the Canadian government’s pledge to eliminate the GST from purpose-built rental construction. 

“Not only does it take some projects that were previously not feasible and make them worthwhile, this may allow us to add even more units on the existing projects we were doing,” Starlight vice-president of development and municipal affairs Howard Paskowitz told RENX.

Starlight executive VP of capital expenditure and development Mariano Bocchicchio added in the same interview that Starlight is also reviewing several projects in its pipeline to see if there are opportunities to provide more homes than originally planned.

Starlight is positioned to start construction on 1,200 new rental units by 2024 and an additional 1,800 in 2025. The company is on track to build up to 28,000 new units in the next 10 years and now has set a goal to exceed that target.

“With the implementation of new government policies, we'll be able to reinvest that capital into building more homes and directly increasing the attainable housing supply across Canada,” said Bocchicchio. 

Projects around Toronto, Vancouver and Victoria

While Bocchicchio said it’s too early to provide details about individual projects, he divulged that these new apartments will be largely centred around Toronto, Vancouver and Victoria.

There are plans to build about 700 units in the northern part of Greater Victoria, many of which will have two or three bedrooms to accommodate families. There are also plans for a high-rise apartment with about 550 units and retail at grade in downtown Victoria.

Starlight is looking to get into the ground and begin construction of high-rise apartments and stacked townhomes in Toronto and Vancouver in 2024 and 2025. 

“Whenever we are planning a project, we run statistics on the demographics and try to build a product that's going to satisfy the neighbourhood or region,” Bocchicchio said.

Starlight’s pipeline of anticipated apartment developments include some sites that have already received approval to move forward and others that still must complete that process.

“In the past couple of years we've received zoning approval for approximately 2,000 suites in the city of Toronto,” Paskowitz said.

Starlight recently received approval for projects in Guelph, Ont., and Paskowitz also expects to see developments come online in other Ontario cities — including Kitchener, Aurora and Mississauga — in the not-too-distant future.

Taxes account for big part of construction budgets

The combination of federal and provincial taxes is the largest expense in most rental project budgets, so Toronto-based Starlight is also pleased to hear some provincial governments also intend to remove their portion of the harmonized sales tax from new rental housing construction and provincial sales tax from some construction costs affiliated with purpose-built rentals.

The GST is a five per cent tax.

“We are very encouraged to see the three levels of government all recognizing that, without their involvement, we will not be able to solve this housing crisis,” Paskowitz said.

“Encouraging and incentivizing new rental construction, which includes market and affordable housing, will only come when policies are in place to support our sector.”

Other government incentives

The federal government also announced plans to increase the annual issuance of Canada Mortgage Bonds to $60 billion from $40 billion, with the additional proceeds financing rental building construction. 

The bonds are issued by Canada Mortgage and Housing Corporation, which uses the proceeds to buy pools of mortgage-backed securities from private lenders.

This ultimately reduces the cost of financing for developers and the government claims this change will contribute to the construction of up to 30,000 more rental apartments per year.

Paskowitz believes the federal government will also increase its investment in infrastructure to support increased housing.

Paskowitz would like to see municipal governments applying lower mill rates for rental housing properties to give the sector a further boost.

“That one is a tough sell, but we think there's a strong argument for it because if they don't find ways to incentivize further housing and there's no new development, they're not going to be collecting any additional property taxes,” he said. 

“All we're asking for is a reduction in the amount of property taxes they would be collecting from new multiresidential product.”

Starlight communications manager Randy Fox said government incentives could potentially entice developers who primarily build condominiums to rethink their strategy and move into purpose-built rental construction.