RESCON: A grim state of affairs

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Taxes are out of control and pushing the cost of new homes beyond the reach of most working families

It is time to face facts. Housing targets set by the federal and Ontario governments are out of reach. We must accept the truth, even if it’s unpleasant, and acknowledge the stark reality of our situation.

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The state of affairs is grim and the walls are closing in. We must take serious and decisive action to confront the situation and bring about change. There is no more room for denial.

Housing starts in the last quarter declined nearly 17 per cent compared to the same period last year, according to a report from the Financial Accountability Office. For detached homes, it is worse, as Ontario is on track for the lowest level of annual starts on record back to 1955.

In 2022, the province set a goal of building 1.5 million homes in the next decade, or 150,000 a year. However, we have never come close to that target and are on track for 81,300 starts this year. According to the province’s own projections, we’d have to hit record highs every quarter.

A study released recently by the Smart Prosperity Institute, a University of Ottawa-based research network, indicates that Ontario has consistently ranked in the bottom half of provinces in terms of homebuilding per capita over the last six years – and it is only getting worse.

Another separate report prepared recently for RESCON by the Canadian Centre for Economic Analysis notes that the average tax burden on a newly constructed home in Ontario has jumped to almost 36 per cent of the purchase price, up from 31 per cent just three years ago.

On an average price of a new home in Ontario which is about $1,070,000, consumers are paying nearly $381,000 in income taxes, corporate, sales and transfer taxes, development charges and fees. The figure is a 16-per-cent increase over 2021 and highlights a troubling trend.

The tax and fee burden on new homes is more than twice that of the rest of the economy and governments now derive nearly four times more revenue from the sale of a new home than builders.

Taxes are out of control and pushing the cost of new homes beyond the reach of most working families. It has created a brain drain in Ontario. Over the last four years, more than 100,000 more people have migrated out of Ontario to other provinces than have come into the province.

To bring down the cost of building new housing, we need immediate reform of the tax and fee structures. Development charges are a big part of the fees charged on new housing. Municipalities need these fees to offset the cost of building new infrastructure. The federal and provincial governments must take a more active role in funding municipal infrastructure.

The housing supply crisis is an issue for all Ontario residents – even those who own appreciating houses with manageable mortgage payments. Our economic success depends on a robust housing supply.

We are nearing the point of no return. To turn the corner on housing, we must keep driving change.

Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.