Today, in an era of sweeping and readily abundant disinformation, it is often difficult, impossible sometimes, to separate fact from fiction, truth from falsehood, and reality from illusion.
Disturbingly, a recent survey by Liaison Strategies revealed the residential construction industry is not immune. There appears to be a disconnect between what people believe and is actually happening.
For starters, the survey shows Ontarians are divided on main contributors to the cost of buying a home. Only 10 per cent believe government fees and taxes are what most affects the cost of a home. But the fact of the matter is the tax burden accounts for a big piece of the pie.
A report by the Canadian Centre for Economic Analysis found taxes, fees and levies including development charges account for roughly 36 per cent of the purchase price of a new home, which is a substantial load, especially when it is amortized over the life of a mortgage.
While questions in the survey were not specific to new housing builds, the results highlight a clear gap between what policy-makers emphasize and what the public believes is driving costs.
The survey also indicates 42 per cent of Ontarians believe housing construction has remained about the same compared to five years ago, while 33 per cent said it has increased somewhat.
However, starts in Ontario are down, especially in Toronto, compared to five years ago.
But enough of the statistics.
The crux of the matter is that the tax burden on new housing is much higher than most people think it is.
Presently, the new homebuilding sector is contending with the most challenging environment ever experienced. A literal perfect storm of stifling taxation, rising material costs, unpredictable market forces, labour costs, stubbornly high interest rates, cumbersome planning approvals processes and overly restrictive regulatory policies has created an environment where it is difficult for builders to build homes that people can afford.
The fix?
We must reduce the excessive tax burden on new housing. Taxes, fees and levies are so exorbitant, and regulatory processes so restrictive and bureaucratic in nature, they have stalled the housing sector at a time when homebuilding is most needed by Canadians across this country.
Like food and security, housing is a basic economic need for most people. It is also a vital building block for broader prosperity and well-being.
Various levels of government must be aligned in the effort to reduce taxation on new housing and adopt fiscal policies that promote rather than hinder production of housing. We tax housing like alcohol and tobacco, so-called sin taxes, but it’s not rational considering the crisis.
In May, the federal government approved reducing the federal share of sales taxes on new housing up to $1 million for first-time buyers and reducing the sales tax for first-time buyers on a sliding scale for homes purchased between $1 and $1.5 million. At first, the Doug Ford government indicated Ontario would follow suit, but so far, the province has not taken any action.
If both the feds and Ontario removed the sales taxes on new housing, it would reduce the price of a $1-million home for first-time buyers, for example, by $130,000.
RESCON would like both the federal and provincial governments to take it a step further, rebating the sales taxes to all new home buyers, not just first-time buyers, for a prescribed period of time. Development charges also must be reduced as they contribute significantly to the tax burden.
All this could be done tomorrow. These taxes have become exorbitant. The residential construction industry is at a standstill and laying off workers. Sales have tanked and starts are dismal.
The impact on the economy will be substantial. Reports suggest if significant public sector action is not taken to support the industry and reverse the ever-increasing job losses, Ontario will likely see a reduction in GDP by as much as 1.5 to 2.5 per cent in the coming months.
Presently, the housing targets set by both the federal and provincial governments are a pipe dream.
The Parliamentary Budget Officer reported recently that, under the baseline outlook, 2.5 million housing units will be added to Canada’s housing stock by 2035 – equivalent to 227,000 net new units completed annually over 2025 to 2035. However, the officer estimated an additional 690,000 additional units are needed over that time period, or another 65,000 annually.
In Toronto, the situation is particularly bad. The city is on pace for its lowest annual housing starts since 1996, according to a new report from the Canada Mortgage and Housing Corporation. Condo pre-construction sales in Toronto are at their lowest level since 2009 while rental apartment starts have decreased eight per cent compared to the same time period in 2024.
The seriousness of the housing crisis requires quick, decisive, concrete action to reduce the tax burden on new housing. The potential economic consequences of doing nothing could be serious.
Richard Lyall is president of the Residential Construction Council of Ontario. He has represented the building industry in Ontario since 1991. Contact him at [email protected].
