1. Does a company that holds and manages but does not construct a low-income rental property meet the definition of a “limited-dividend housing company” in s. 2 of the National Housing Act and qualify for the tax exemption under s. 149(1)(n)?
The definition in s. 2 referred to “a company incorporated to construct, hold and manage a ‘low-rental housing project’, the dividends payable by which are limited by the terms of its charter or instrument of incorporation to five per cent per annum or less.” CRA indicated that such “definition requires a company to construct, as well as hold and manage the low-rental housing project” so that “a company that purchases and does not construct a low-rental housing project would not meet the definition.”
2. Would a company, who rents units to a registered charity which in turn rents the units to low-income families satisfy the definition of “low-rental housing project” in s, 2 of the National Housing Act? CRA responded:
A low-rental housing project is defined in section 2 of the National Housing Act as:
“a housing project undertaken to provide decent, safe and sanitary housing accommodation, complying with standards approved by the Corporation, to be leased to families of low income or to such other persons as the Corporation,
(a) in its discretion, in the case of a housing project owned by it, or
(b) under agreement with the owner, in the case of a housing project not owned by it, designates, having regard to the existence of a condition of shortage, overcrowding or congestion of housing”The fact that the company rented units suitable for housing to a registered charity which in turn rented the units to families of low income does not appear to preclude the company from meeting the definition, where the company has been designated by the Canada Mortgage and Housing Corporation (CMHC) and the CMHC has entered into an agreement with the company, as provided for in the definition of “low-rental housing project”. However, we would most likely consult with the CMHC before making any final determination.