Canada’s housing crisis is no longer looming on the horizon. It is already here.
What policy-makers must now confront is something even more dangerous: the cost of doing nothing.
Across Ontario and much of the country, new housing construction has slowed dramatically. Projects have stalled and cranes have disappeared from skylines because the economics no longer work.
If the trend continues, the consequences will extend far beyond the housing sector. They’ll ripple through the broader economy and labour market.
The alarm bells are already ringing.
Research by the Canadian Centre for Economic Analysis (CANCEA) paints a sobering picture of what lies ahead if housing activity continues to decline.
According to a recent analysis, a systematic reduction in housing activity of more than 33 per cent over the next five years, which is what’s anticipated, would displace nearly $16 billion in economic activity annually. On top of that, Ontario would suffer an additional $7.6 billion in lost social value each year.
The economic fallout would be severe. At the bottom of such a contraction, the broader economy could see 130,000 fewer jobs, while nearly 400,000 fewer Ontarians would be housed.
Those numbers represent more than just statistics. They reflect workers who lose employment, families unable to find homes and communities struggling with rising housing instability.
This is the storm gathering over Canada’s housing market.
Governments have begun to acknowledge the urgency of the situation. The feds recently took an important step by eliminating the five-per-cent GST on new homes for first-time buyers priced up to $1 million, with a graduated reduction on homes up to $1.5 million.
That move matters, as taxes on new housing inflate prices and suppress demand for new construction.
Equally important, the federal action will trigger a matching move in Ontario to remove the eight-per-cent provincial portion of the HST.
But the truth is that these measures, while welcome, are not enough to reverse the deep freeze gripping new housing construction.
If governments are serious about stabilizing the housing sector, they must take the next logical step: implement a three-year sales tax holiday on new homes for all buyers – not just first-timers.
Global News has reported the Doug Ford government is poised to do just that and offer all buyers a significant tax discount on newly built homes. As part of his spring budget on March 26, Finance Minister Peter Bethlenfalvy is expected to announce the provincial portion of the harmonized sales tax will be removed for anyone buying a newly constructed home.
This would mark another step forward.
Economic modelling suggests such a move would not only stimulate demand but could prove revenue-neutral over time. Increased housing activity generates jobs, incomes and broader economic growth that ultimately returns tax revenue to government.
Even if home prices stopped rising entirely tomorrow, it would take the average Canadian metro area 16 years to reach a basic affordability benchmark where homes cost four times the household income.
The Missing Middle Initiative has documented that across 23 Canadian metropolitan areas, newly built family-sized starter homes are now more than twice as expensive relative to income as they were in 2004.
Since then, new-home prices at the lower end of the market have risen by 265 per cent, while incomes for young dual-earner households have grown only 76 per cent.
Without major policy changes that reduce the cost of building homes, middle-class families could remain priced out of the market for decades.
A big driver of high housing costs is something few buyers fully understand: development charges.
These municipal fees, imposed on builders when projects receive building permits, are intended to fund infrastructure such as roads, water systems and parks needed for growing communities. But over the past decade they have spiralled dramatically.
In Toronto, development charges on a two-bedroom condominium unit jumped from roughly $8,000 to $88,000 in just 10 years.
While developers pay the charges upfront, the costs are inevitably passed along to buyers through higher home prices.
In effect, new homeowners are being asked to shoulder the financial burden of infrastructure that benefits entire communities.
Province-wide, taxes, fees and levies now account for almost 36 per cent of the cost of a new home, according to analysis prepared for RESCON.
If governments want to restore housing affordability, they must rethink how growth-related infrastructure is financed.
One promising idea is the creation of municipal service corporations capable of issuing debt to finance infrastructure over long time horizons – much like utilities do. Rather than charging massive upfront fees, infrastructure costs could be amortized over decades and repaid through user fees.
Ontario’s housing minister, Rob Flack, has proposed piloting such a model in the Region of Peel.
If successful, it could fundamentally change the way municipalities fund water, wastewater and other critical infrastructure.
Some jurisdictions have taken steps. The cities of Mississauga and Burlington, for example, are exploring temporary reductions or eliminations of development charges to spur housing construction. In 2024, the City of Vaughan significantly reduced development charges by 47 per cent.
But they cannot do it alone.
The cost of inaction is already measurable in billions of dollars and tens of thousands of jobs.
But the long-term consequences could be even worse: lost skilled trades capacity, weakened apprenticeship pipelines and a generation of Canadians permanently locked out of homeownership.
Canada must change course.
A three-year sales tax holiday on new homes, combined with serious reform of development charges, would help restart the housing engine.
The alternative is to watch as the storm gathers strength – and then pay a higher price when it finally hits.
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].
