Dan Albas MP report: Rising inflation cuts deep
This week marks the beginning of the fall sitting of the House of Commons. However, the topics dominating the discussion in Ottawa differ significantly from what I hear from citizens in our riding of Central Okanagan-Similkameen-Nicola.
The most common concerns raised by local citizens in our riding relate to rising interest rates and inflation. This is due to the recent announcement by Statistics Canada that Canada's inflation rate for August rose by 4.0% year over year, following a 3.3% increase in July.
Many citizens are now experiencing severe anxiety as they fear further interest rate increases from the Bank of Canada. It has become a common concern to hear from citizens struggling to cover their bills at the end of the month. The rising cost of essentials like gas and groceries only adds to many households' challenges.
In response to these concerns, the Prime Minister called a meeting with representatives from Canada's five largest grocery stores. The Prime Minister requested that grocery prices be stabilized by Thanksgiving in October, or the stores would be subject to higher taxes.
However, experts, including stakeholders within the grocery industry, have pointed out that adding more costs to grocery stores through increased taxation will increase prices rather than decrease them.
Some recent expert reports suggest that grocery prices will likely stabilize independently in the coming months without government intervention. These reports also highlight increased costs from farmers and grocery producers, such as higher transport costs, as a significant cause of grocery store price increases.
I'm not sure if the Prime Minister was sincere in his threat, as many have suggested that this action was more for show to give the impression of taking action without actually doing so.
In a separate announcement, the Prime Minister committed to removing the Goods and Services Tax (GST) on new rental construction.
This policy is not new in Canadian politics: Pierre Poilievre, the Conservative leader, has long been calling for this policy, among many others, as a common sense way to incentivize more housing supply.
While the industry's reaction to this announcement has been mixed, from my view, it is a good move for a government that seldom listens to anyone outside the Prime Minister's Office. Lack of available rental housing in an issue that is boiling over with many citizens that have been evicted or forced to sell are left with nowhere to go.
Given that higher interest rates have halted many housing projects, this may encourage some purpose-built rentals on the financial margins to proceed. New rental housing stock would be welcomed, especially in the fast-growing municipalities of our area, where the rents are highest and vacancies lowest.
New rentals would provide more choice and competition, particularly for new workers, which is a crucial challenge for employers in attracting and retaining workers.
However, there is no guarantee that any newly constructed rental housing will be offered at below current market rates or that these projects on the margins will be sufficient in quantity to slow down rapidly rising rental rates or increase local vacancy rates. It is important to consider that with high interest rates, developers who borrow money to build rental housing need to generate a return to cover the higher interest costs or risk being turned down by their lenders.
Even developers who can self-fund need to break even and earn a profitable return beyond what they would receive from safer liquid assets. All these factors ultimately work against rental affordability.
In conclusion, while removing GST on rental construction is a positive step, it is no silver bullet.
My question this week is: Do you think that removing GST on rental construction will be sufficient to increase rental affordability? Why or why not?
Please feel free to contact me at Dan.Albas@parl.gc.ca or call toll-free at 1-800-665-8711.