Fixing housing crisis would mitigate economic fallout from tariff threat

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Reducing government fees and taxes on new housing would mitigate economic fallout from tariff threat

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As provincial and federal governments work to mitigate the impacts and economic uncertainty caused by the present trade dispute and resulting tariffs, there are three factors that they need to keep in mind.

First, the GTA desperately needs more housing. Second, building more housing for Canadians creates domestic jobs, economic activity and supports industries from coast to coast. Third, new housing projects are struggling now with financial viability due to a “cost to build” crisis.

All of these factors make now the time when provincial and federal governments should be reducing or eliminating the HST on new homes.

The present “cost to build” crisis has been brought about by rapidly rising costs over virtually every aspect of new projects, challenging the financial feasibility of building homes and making it impossible to produce them at prices the market can or will absorb.

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Significant cost increases have affected materials, labor, land, financing, professional services, and government fees, taxes, and charges applied to new homes. New home sales have dried up, housing starts are falling, and the industry is slowing down precisely when we need it to be gearing up.

Layer on top of this the shaken consumer confidence due to tariff and economic uncertainty and it only further underscores the need for urgent solutions.

The GTA is the economic engine of Canada, and a thriving housing market is crucial to its continued success. Housing construction is not just about building homes – it is about building an economy. One hundred per cent of the direct employment is Canadian, and over ninety per cent of the materials used in home construction are sourced from within Canada.

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This supports hundreds of thousands of jobs across a variety of industries that provide materials that go into building a home. Building homes in the GTA literally builds our economy, supports domestic industries nationwide, and protects Canadian jobs.

Yet, government fees and taxes account for a staggering 25% of the cost of an average home in the GTA – a significant portion of which comes from the HST.

Since the tax and its rebate structures have not changed since they were first introduced in 1991, tax revenues for the government have soared and the significant dollars added to the cost of a new home have become a barrier to affordability and a burden to first-time buyers and young families.

At the federal level, the HST amount has increased dramatically along with home prices. When the GST (now HST) was introduced, the average Ontario home cost $276,000, and the federal government collected $8,800 in sales tax.

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By 2023, with the average home priced at $1.023 million, the federal government collects $47,000 in HST — a 435% increase.

Similarly, the provincial HST revenues per house have also soared. In 2010, the average new single-family home in the GTA cost $519,000, and the provincial government collected $14,000 in sales tax.

Today, the price has jumped to $1.63 million, and despite the province’s $24,000 rebate, the provincial portion of the HST still adds about $93,000 to the cost of a new home. This directly impacts buyers and further erodes affordability.

The solution is clear: Both the federal and provincial governments must work together to eliminate the HST on new homes. Inaction at either level of government will undermine the impact of the other’s efforts.

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By working together, both governments can deliver a solution that helps ease the financial burden on homebuyers and ensures the GTA’s economic engine continues to run smoothly – and help counter the current global economic uncertainties at hand.

Now is the time for bold action. Simply put, our economic engine and societal well-being is at stake.

Dave Wilkes is President and CEO of the Building Industry and Land Development Association (BILD), the voice of the home building, land development and professional renovation industry in the GTA. For the latest industry news and new home data, visit www.bildgta.ca.

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