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Kim G C Moody’s Musings – 1-1-1 Newsletter For April 9, 2025
One Comment About Taxation – So the Liberals Think That Recycling the 1970s MURB Tax Shelter Idea is a Good One, Eh?
I love studying history. There’s so much to learn! In my undergraduate studies, I made sure to load up on post-Confederation Canadian history courses. It’s truly fascinating to learn how this country was built. When I study proposed taxation policy, I am always interested if these “new” policies were ever considered historically. More often than not, the answer is “yes”.
With respect to Canada’s housing challenges, there have always been pockets of time in our history when there were great needs for more housing units most often because of significant population growth. Governments have often let the market respond to such needs, as they should, but Canada also has an interventionist history that at times has been questionable.
For example, recently, the Liberal government played the bogeyman approach to housing challenges instead of looking in the mirror to realize that their immigration policies were the significant contributor. And to make it worse, the bogeymen were largely attacked through the taxation system. Need a reminder? Sure, here’s a quick list:
- The Underused Housing Tax applies a 1% tax and an annual filing requirement to those non-citizens of Canada who are apparently sucking up a significant portion of the housing in Canada at the expense of average Canadians. Such a tax and filing requirement has been a debacle since it was first introduced in 2022;
- The prohibition of non-citizens from purchasing Canadian residential property (since, again, non-citizens are, for sure, causing Canada’s housing problems). This is not a taxation measure, but it has caused a chill and complexity when planning for non-resident investment into Canada. First introduced in 2023 for a 2-year period, it was extended for another 2-year period to expire January 1, 2027;
- Property “flippers” are also apparently a problem since they, without doubt, suck-up property. Accordingly, the property flipping tax was introduced in 2023 which causes residential property disposition gains to be treated as fully taxable if disposed of within a 12-month period from acquisition unless certain “life exceptions” are met. This is an absurd and duplicative tax…the current Income Tax Act already has the tools to deal with “flippers”;
- The prohibition of deductions for short-term rental owners who operate in a jurisdiction where such rentals are prohibited was introduced for 2024. And, why not? Because we all know that short-term rental owners, especially in my neighbourhood, are one of the causes of housing shortages. Yeah, right. This dangerous provision is an affront to good Canadian tax policy.
In case the above strokes of genius weren’t enough, the Liberals are now reaching back to a flawed 1970s playbook. Last week, the Liberal Party announced that should it be re-elected it would “get back into the business of housing” by building 500,000 homes per year. You don’t need a grade 12 high school diploma, or in Mr. Carney’s case a PhD in economics, to realize that such a target is simple bluster. Anyone who believes that this is an achievable target should spend 5 minutes with our country’s great entrepreneurial home builders; most will give you an earful on how unrealistic such a “plan” is.
Buried in the housing announcement was a statement that the Liberals would like to resurrect a 1970s tax shelter program created to try to incentivize rental property construction, the “multiple unit residential building” (“MURB”) program. Investors in certified MURB projects were allowed to claim accelerated capital cost allowance – essentially, depreciation – on the building, and use those deductions to create or increase a rental loss for tax purposes. Those “paper losses” could be deducted against the investor’s other income, thereby sheltering that income from tax. This favourable tax treatment was intended to attract private capital into rental housing by improving after-tax returns.
While the MURB program did cause rental construction, it came with some significant behavioural consequences. The Liberals’ recent announcement boasted that the MURB program helped produce almost 200,000 units from 1974-1981. However, a March 1981 CMHC Report stated “Estimates prepared in the course of this study indicate that at the end of 1980 there was a total of 170,000 MURB dwelling units either completed or under construction in Canada”. Interestingly, though, the Report made it clear that those estimates should NOT be interpreted as implying that the MURB provision stimulated additional rental starts. That’s a distinction with a difference.
The 1981 Report also found that MURB projects were more expensive because investors valued the tax benefits and that it was not an efficient mechanism for promoting rental investment. The Report called the program a stop-gap measure that didn’t solve the fundamental issues of high development costs and low rental yields. The main beneficiaries of the MURB program were found to be developer / promoters and investors with high marginal tax rates. Many investors were buying MURB investments simply for the tax shelter with little to no consideration of the investment issues.
One of the quotes in the Report is also noteworthy: “It appears likely that, if left to its own devices, the rental market would have begun to respond to the excess demand on its own — albeit at higher rents.” Yep, letting the market deal with supply / demand is almost always the most appropriate answer.
Given the above, the famous MacEachern Budget of November 12, 1981 announced the termination of the MURB program for any new projects. In 1987, the complete repeal of the MURB program was announced and phased out over a 3-year period.
In other words, the MURB program’s economic and social benefits did not exceed nor justify its costs.
Revisionist history has been quite popular in recent years. In the present case, having the Liberals think that resuscitating the MURB tax shelter is a good idea conveniently ignores historical facts and experiences.
The study of history isn’t just a hobby, it’s a guide. If Carney truly understood history – or basic economics – he’d understand that real solutions come from unleashing market forces, not failed government tax vanity projects dressed up as “housing plans”.
One Comment About Leadership – Are You a Leader That Is “Insincere in Heart”?
A number of years ago, I was introduced to an old short book written by William George Jordan called “The Majesty of Calmness”. First published in 1898, it is a breezy read that is full of wisdom. I’ve read it a number of times and each time I do, I learn something new. Overall, the purpose of the book is to teach why calmness is a great state to be in. As the opening paragraph of the book states:
“Calmness is the rarest quality in human life. It is the poise of a great nature, in harmony with itself and its ideals. It is the moral atmosphere of a life self-centered, self reliant, and self-controlled. Calmness is singleness of purpose, absolute confidence, and conscious power, ready to be focused in an instant to meet any crisis”.
Just reading that paragraph makes me want to seek calmness. Ahhhhh, yes. Calmness is certainly worth chasing and pursuing.
Later on in the book, the author describes numerous types of people to avoid. In other words, if you associate – or heaven forbid you are one of these people – then calmness will be difficult to achieve. One of the types of people to avoid is described on page 18 as follows:
“There are men who are insincere in heart, and that insincerity is radiated by their presence. They have a wondrous interest in your welfare, when they need you. They put on a “property” smile so suddenly, when it serves their purpose, that it seems the smile must be connected with some electric button concealed in their clothes. Their voice has a simulated cordiality that long training may have made almost natural. But they never play their part absolutely true, the mask will slip down sometimes; their cleverness cannot teach their eyes the look of sterling honesty; they may deceive some people but they cannot deceive all. There is a subtle power of revelation which makes us say: “Well, I cannot explain how it is, but I know that man is not honest.”
I challenge you to read that again. Can you think of people who fit that bill? Some political “leaders”? I certainly can. Do I associate with them? Nope. I go out of my way to avoid an association with that kind of insincerity. I hope you do too. You’ll never be a calmer or better person because of such an association.
Leaders, please tell me that description is not you. If so, shame on you—and fix it. The world’s had its fill of plastic leadership.
One Comment About Economics – The Canadian Election Promises to Cut “Red Tape”
Administrative delays or layers of bureaucracy to get projects done are often referred to as “red tape”. While well-intentioned rules may have been put in place to deal with mischief or other issues, the rules often become a problem in and of themselves causing delays with projects that can be of great overall benefit. Such red tape has long been talked about in election campaigns and this Canadian election is no different. Both the Conservatives and Liberals are promising to reduce such red tape. It would be great if the promises were fulfilled. A recent Financial Post article – accessible here –
Canadian businesses have encountered a 2.1 per cent annual increase in the number of total regulatory requirements since 2006, according to a February Statistics Canada report — a total jump of 37 per cent between 2006 and 2021.
Statistics Canada estimated that the growth in regulatory requirements reduced business investment by 9 per cent and caused GDP growth to decline by 1.7 percentage points.
Canadian businesses spent 768 million hours on regulatory compliance in 2024, the equivalent of nearly 394,000 full-time jobs, according to the CFIB’s 2025 Red Tape Report.
On a personal note, I recently agreed to volunteer as a Finance Committee member for a local charity. I had to go through “training” (a lot of progressive BS) that wasted my time and submit to a criminal check with fingerprinting. The “training” and criminal check took over 10 hours of my time….far more time than I volunteer monthly or even quarterly. While I can somewhat understand the need for a criminal check, I don’t feel the same about the “training”. It was red tape. And charities then wonder how they can attract volunteers. While some charities are at the mercy of government requirements, this personal experience is a good reminder of how hard it is to get even larger projects completed when the red tape is multiplied by a much larger magnitude.
I’m always a fan of reducing our country’s red tape so as to help improve overall
Bonus Comment – Quote From 19th Century Author – James Allen – About the Importance of Calmness
“Calmness of mind is one of the beautiful jewels of wisdom. It is the result of long and patient effort in self-control”
Absolutely agree! Leaders, calmness is worth working towards!
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