MURBS are back, and this could be the answer for an abundance of housing in Canada
A tax provision introduced in 1974 created a lot of Multiple Unit Rental Buildings. Of course, it was killed by Conservatives.
I liked John Turner, Canada’s 17th Prime Minister. I bought a pack of his memorial postage stamps and still have five of them. I shared an elevator with him a few times; he lived in the same apartment building as my parents. My wife Kelly has a great story about standing in line behind him at the local liquor store (yes, ex-Canadian Prime Ministers buy their own liquor) when the teller was saying, “I know you from somewhere!” He modestly demurred something like, “maybe it will come to you.” To this day, Kelly regrets not yelling, “That’s our former Prime Minister!”
One reason I liked him goes back to his role as Minister of Finance during Pierre Trudeau’s government. In 1974, when I was still in architecture school, he introduced a little tax provision that incentivized the building of MURBs (Multiple Unit Residential Buildings). Turner noted at the time:
“I have already referred to the short-term prospects for construction of new housing. The projected weakness in this sector of our economy troubles me a good deal. It threatens to reduce employment, raise production costs and increase housing prices and rents. Even more important, a reduction in the supply of new housing could lead to a lower standard of accommodation than Canadians deserve.”
Mike Moffatt of the Missing Middle Initiative says, “nobody’s heard about the MURB” but he is showing his youth (or I am showing my age); back in the seventies, everyone heard of MURBs, especially if they had a bit of money to invest.
Anyone who makes a capital investment gets to write off a portion of it each year. In Canada, it is called the Capital Cost Allowance (CCA). Usually, it can only be applied to the particular investment; in housing, it could be applied to the rental income. What Turner did was change the rules so a CCA deduction from a MURB could be applied to other income. Moffatt explains:
“The MURB provision “allows individuals and corporations not in the business of real estate to deduct losses created by capital cost allowances on rental property from non-rental income” (emphasis added). In other words, an owner (in whole or in part) of a MURB provision-eligible apartment building can deduct some of the expenses associated with that building against their personal (or corporate) income.”
This sounds obscure, but it was a very big deal. Every doctor, lawyer, or business person with income to shelter dived into MURBs and thousands of units of rental housing were built. And many young architects like me got their first jobs working on housing projects built with MURB money.
And of course, it got killed by a free-market-loving Conservative government, which claimed that the housing crisis was over and that the deductions were too expensive. Conservative finance minister John Crosbie (whom I also met when he was Lieutenant Governor of Newfoundland/Labrador in 2010) killed it:
“I have reviewed the special capital cost allowance provisions for multiple-unit residential buildings. This tax shelter was introduced in 1974 and has been extended many times since. The pressure on vacancy rates is not now as serious as previously. Thus, I am letting this provision expire, as currently provided, on December 31 of this year.”
Now, the Canadian federal government under Mark Carney is considering the reintroduction of the MURB provision. Moffatt has great hopes for it, noting that “The built-in speed incentive of the MURB Provision will favour low-rise projects, such as multiplexes and townhouses, and other forms of missing middle housing over mid- and high-rise projects, as it allows investors to achieve a faster return on capital.” Moffatt concludes:
“We hope the federal government will begin consultations on a redesigned MURB provision and institute it by the start of 2026. If done correctly, it could accelerate the construction of missing middle rental housing, put more single-family homes back into the hands of families, and aid in the development of a condo financing model that does not rely on mom-and-pop investors.”
I concur. There are those who preach the abundance agenda and claim we need to reduce regulations, red tape, and lower standards to promote housing construction. Developers blame the current crisis in the housing market on development fees and overregulation. But as John Lorinc notes in the Star, the developers should look in the mirror:
“The reality is that large condo developers spent much of the 2010s and part of the 2020s riding a heady expansionary wave due to historically low interest rates. Given the abundance of easy and cheap debt, investors were willing to pay ever higher prices, both for pre-sales and flipped finished units, because they reckoned that steadily rising market values would allow them to not only recoup their investment but recycle the equity into other units.”
Yes, the City cranked development charges, fees and park dedications, because they could. As Lorinc notes,
Developers, in turn, understood that they’d maximize their profits by building as many tiny apartments as possible, with wins all around: Lenders were happy. Speculators were happy. Architects and planners were happy. Brokers were happy. Even municipalities realized they could jack up development charges without slowing the pace of development.
Now, nobody is happy, and it has little to do with regulations or red tape.
It’s all about the money. In the seventies, under Trudeau and Turner, the money went into MURBs and social housing. There is no reason why we can’t rinse and repeat.
More on the social housing boom of the seventies:
How Canada could become a green building superpower and build 3.5 million homes
There is a lot of optimism, even on LinkedIn, after the recent Canadian election. Toby Heaps, publisher of Corporate Knights Magazine, writes:
Special offer!
I do not want to put up a paywall on this site, but it provides a meaningful portion of my income. So here’s a limited-time offer: I will send a signed copy of the print edition of “Living the 1.5 Lifestyle” to anyone in the USA or Canada who signs up for a one-year subscription (C$50, cheap at about US$35- US$37-the dollar is falling ). I am running out of stock, so hurry!
I also worked on some of these buildings straight out of architecture school.
They were simple six or seven story concrete apartment buildings that easily fit into neighborhoods didn't cost a fortune and were easy to build. No gyms pools maybe a party room.
A program like this allows developers large and small to access pools of capital that they wouldn't otherwise be able to , to cover the front end cost of their projects. More capital means more building.
The only cost of the government is deferred or rearranged tax revenue. it has no upfront cost, no subsidies and it was actually very straightforward because there were deadlines for every year to register in the program and things got done in a hurry because of that.
Much of our now 50-year-old urban apartment buildings were built out of this program.
Bring em back soon.
"Now, nobody is happy, and it has little to do with regulations or red tape."
Sorry, it is ALL about Regulations. The MURB didn't exist before until such Law/Regulations were instituted and then it was ALL about the Regulation when it was "expired" and MURBs were no more. Else this post wouldn't have a case for kvetching about it.
When people supplicate themselves before government to argue or demand for any kind of advantage either personal / corporate gain OR ideology, that is called Rent-Seeking (double-plus-good if it locks out your competition, but that's not the case here, I think). It is done by altering current Law / Regulation / Ordinances (and the "red tape" pertaining to any of that) to provide advantages to some but not others (or intentionally degrades another set of people needs or wants).
In this case, it is over a particular kind of housing, MURBs, that some prefer over other type of housing. Whether or not it is "better" or "worse" is not my concern. What it is about is government picking winners and losers in the marketplace - government directed economy (which generally ends badly - those in government usually don't understand the true results of creating incentives or disincentives and generally never worry about the secondary, tertiary, or quaternary results thereof. That is also part of Rent-Seeking.
So, Lloyd, your arguments here are ALL about Regulations and the Laws that spawn them.
Oh, before I forget about feckless and clueless elected officials, let's not forget about the usual crowd of unelected, unaccountable, and unassailable bureaucrats also interjecting Red Tape into most processes. Just look at what is happening in Palisades, California right now for a prime example.
That stated, this post's contents rails against 1) differing philosophical outlooks for how Government runs itself (e.g., whose ox is getting gored or not), and 2)
However, I will agree with you on one point: "...and that the deductions were too expensive."
This is due from the simple fact that the cost and expense of Government NEVER retreats from its current budget bottom line. What should have been done when the Deductions kicked in was to trim governmental functions - they didn't. After all, every Revenue Dollar is sacred and government always takes its vigorish off the top FIRST (re: Development Fees et al)
So yet another example of The Law of Unintended Consequences reared its head.