December 4, 2024
Articles
Affordable is Charitable – CRA Clarifies Guidance; Links Charitable Housing to Income Limits
By James Struthers, Anders I. Ourom, K.C., Desmond Wang, and Nazanin Khodarahmi
The Canada Revenue Agency (CRA) recently published updates to its CG-029 – Relief of poverty and charitable registration.
The CRA’s guidance on charitable housing has been long criticized for its lack of clarity and potential chilling effect on affordable and below market housing. The recently published updates align policy with the housing affordability crisis, link the definition of charitable housing to local income limits, and clarify permitted incidental benefits.
In this article we’ll cover the topics of CRA policies and guidance generally, recent history on affordable housing as charity, and how the changes might impact housing providers in British Columbia.
CRA Policies and Guidance Generally
CRA policy and guidance is prepared to facilitate awareness, understanding, and compliance but is not binding on an adjudicator or court. It is however indicative of CRA decision making and, given the cost of appeals and judicial reviews, compliance is advisable. CRA policy and guidance has a significant impact on the charitable sector’s operations and the supports available to those in need.
CRA Policy and Charitable Housing
Prior to these recent updates, the guidance on when affordable housing is considered charitable was quite limited. The CRA’s main guidance respecting housing as a charitable purpose may be found in CG-029 and CG-022 – Housing and charitable registration. Additional commentary is provided for in the CRA’s informal description of relief of poverty as a charitable purpose. There remains limited caselaw on what types of housing are considered charitable.
CG-022 was first introduced February 2014, replacing its prescriptive predecessor CPS-020. While the flexibility was welcome, CG-022 was noted as introducing significant uncertainty by importing novel, broad, and undefined words and phrases, and failing to incorporate cross-references to important related policies and guidance. The guidance did not adequately describe where on the continuum charitable housing ends and non-charitable housing begins and failed to specifically address mixed income and mixed use developments, which put a chilling effect on the affordable and below market sections of the housing continuum.
In the decade that followed, and as the cost of housing became increasingly disproportionate to household income, many Canadians who were not historically considered impoverished ceased to have access to a basic amenity of life: adequate housing.
An additional challenge is that the cost of affordable housing varies widely depending on where in Canada you’re located, and that programs in each province and territory to support or provide charitable and non-profit housing differ considerably.
CG-029 Updates
Amendment of the CRA’s guidance on charitable housing was overdue, to both improve general clarity and modernize its conception of housing impoverishment.
Among other clerical revisions, the CRA’s updates to CG-029 bring two welcome clarifications both in regards to what may be considered charitable housing and what non-charitable activities may be permitted as incidental benefits.
Housing Income Limits
First, the CRA is making a clear statement that providing housing to persons at or below housing income limits is charitable. This is a welcome clarification that we hope will encourage the affordable and below market sectors, as it draws a bright line where below market housing will cease to be charitable.
In Canada, a charitable purpose to relieve poverty can include providing affordable housing as a basic necessity of life and simple amenity. People experiencing poverty are those who lack these kinds of basic necessities of life or simple amenities available to the general population.
To help you better determine if a person or a household is eligible for affordable housing in a particular community or area, your charity can use provincial or municipal criteria that are consistent with Government of Canada funded affordable housing programs across Canada, such as:
- Quebec — core need income threshold (French only)
- British Columbia — housing income limits
- Alberta — income thresholds
- Toronto — rent geared to income subsidy
For a household requiring three-bedroom accommodation, the following are consistent with Government of Canada funded affordable housing programs across Canada:
| Community or area | Year | Income threshold |
| Vancouver | 2023 | $86,000 |
| Calgary | 2024 | $76,000 |
| Whitecourt | 2023 | $52,000 |
| Toronto | 2024 | $79,000 |
| Montreal | 2024 | $56,000 |
| Halifax | 2024 | $67,500 |
The updated guidance also includes a number of helpful links to assist readers interpret and apply the updated terms. There are links to both CMHC and BC Housing websites that define affordable housing, often synonymous with below-market or lower end of market housing, as housing that costs 30% or less of a household’s gross income.
The CRA is stating that affordable housing is charitable housing when provided to persons at or below applicable income limits. Importantly, the CRA does not limit affordable housing just to rentals.
Incidental Private Benefits
Second, the CRA added an example of a permitted incidental private benefit:
The following is as example where providing charitable benefits that relieve poverty to non charitable beneficiaries is an incidental private benefit:
- providing school breakfast or lunch program
Including all students in the program, regardless of whether or not they are experiencing poverty, can avoid stigmatization, and foster an inclusive environment.
Providing charitable benefits to non-eligible beneficiaries is necessary, reasonable, and proportionate to the public benefit that results from furthering the purpose.
Where the potential of providing non-incidental private benefits is non-negligible, charitable housing providers remain obligated to adopt and follow policies and procedures regarding eligibility for below market housing, assessing ongoing compliance, and maintaining books and records.
Existing Flexibility Maintained
Additionally, a charitable housing provider remains able to offer housing at market rates by:
- treating its own residential property as investment property and charging market rents; or
- offering market rental housing or non-market rental housing above the housing income limits, as a community economic development activity (program-related investment or direct funding) or a related business.
Impact on Housing Portfolios, Mixed Use and Mixed Income Properties and Compliance Risk
In our view, both linking charitable housing to income limits and clarifying permitted incidental private benefits are likely to have the effect of inviting more providers to provide affordable and below market housing. This should further encourage charities to participate in mixed income and mixed use developments, and to participate more confidently in rental housing protection activities, each of which make the provision of non-market rental housing more sustainable.
Housing Portfolios
Charitable providers not currently offering affordable housing may be encouraged to enter the affordable housing space in light of this recent update.
As a corollary, charities that currently own or operate, or are planning to acquire or develop, affordable housing may need to consider whether their portfolio still qualifies as charitable housing, and if so, whether that housing may otherwise be permitted as an incidental benefit, investment activity, community economic development activity, or a related business.
Additionally, all charities must be cautious to only engage in activities permitted by their legal purposes. Amendments to the purposes may be required in order to permit operation, acquisition, or development of affordable housing.
Rental Protection Activities
Charitable housers may also consider participating in rental protection acquisitions.
The CRA’s new incidental benefits example in CG-029 is helpful and appears somewhat analogous on its face to housing acquisition funded transactions. Charitable purchasers acquiring mixed income buildings including renters at or above housing income limits may have a stronger leg to stand on that maintaining those tenancy agreements is necessary, reasonable and proportionate to the public benefit of providing charitable housing.
Importantly, charities looking to acquire mixed income housing complexes should consider whether their reliance on a property transfer tax exemption is appropriate, as the wording of the Property Transfer Tax Act appears to make PTT payable on any proportion of non-charitable use of an acquired property even if the non-charitable uses are incidental benefits.
While we hope that the update encourages expansion of charitable housing portfolios, charities seeking to provide market, affordable, mixed income or mixed-use housing should consult legal counsel to ensure they do so in a way that complies with the CRA’s guidance on charitable activities and permitted non-charitable activities.
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Law is fact-specific and contextual and general summaries and articles like this one does not contain, and cannot be construed as, legal advice. This is legal information only and is general in nature. If you need legal advice, consult a lawyer.
For more information about charities compliance, governance, housing acquisition and development, feel free to contact James Struthers or Desmond Wang.