RESCON: Housing crisis on track to get much worse
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To fix the situation, we must take swift, decisive action to lower taxes and overhaul the approvals system
Various levels of government have nibbled at the edges of the housing supply and affordability crisis for some time now. But in spite of their efforts, the situation has become more dire.
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It is now time to rip off the band-aid and get to the root of the problem and cut the excessive taxes, fees and levies on new housing as well as streamline and digitize the residential development approvals process. Till we do that, the pain of the present situation will continue.
Instead of imposing higher fees and restrictions that make it difficult and expensive for builders to erect new housing, governments must ditch any proposals that drive up the price of units.
New housing is still unattainable for many and it is time governments listened to builders.
We have been telling them for some time that taxes and fees must be reduced, and that the development approvals process must be speeded-up – as it only delays projects and adds to the cost.
Case in point, a 2023 report done by the Canadian Centre for Economic Analysis, noted that the tax burden on new housing in Ontario has “significantly increased” and now accounts for 31 per cent of the purchase price.
A new home is taxed at twice that of the rest of the economy. RESCON is getting the figures updated, as we suspect they have increased even more.
Alarmingly, governments make three times more than the builder of a new home. The federal government is the largest beneficiary of new housing, collecting 39 per cent of the share of tax revenues. Yet, the feds contribute only 7.1 per cent of the infrastructure investment in Ontario.
Development charges, meanwhile, are out of control. In Toronto, the charges for single-detached homes have increased from $12,910 in 2010 to $141,139 in 2024 – a whopping 79-per-cent hike.
The charges have increased 42 per cent in less than a year in the Greater Toronto Area. By comparison, development charges on a comparable new home in Calgary are just $22,000.
Cutting the fees would make a difference. In 2022, CMHC figured that if builders didn’t have to pay permit fees, municipal fees, guarantee fees, development charges or density payments, input costs for a high-rise condo in Toronto with 24 storeys could be decreased 15 per cent.
The time it takes to get shovels in the ground is equally concerning. We are still in the dark ages when it comes to getting new homes built, with antiquated processes and sloth-like approvals systems.
In Toronto, latest figures show the five-year average timeline for a site plan decision is 912 days while the five-year average for combined Official Plan amendment/zoning bylaw applications is 729 days.
A recent report done by Altus Group for the Building and Land Development Association noted that housing affordability has continued to worsen in the GTA and, while timelines are improving, the average of 20.3 months per application type is still excessively high. The total length of an application can add between $43,000 and $90,000 per unit, per application submission.
Sadly, reports show the housing crisis is on track to get much worse.
An additional 5.8 million homes must be built by 2030 to bring housing back to affordable levels, according to CMHC figures. But we aren’t even close to that number. In the Toronto area, housing starts dipped 13 per cent in the first half of 2024, compared to the same period in 2023.
In addition, a report by the Canadian Home Builders’ Association revealed a broadly negative home builder sentiment for this year, especially in Ontario.
We are losing some of our best and brightest because of the housing situation. The wealth gap is widening between Canada and the U.S. and, as a result, many people are picking up stakes and moving south.
Paul Beaudry, who was deputy governor of the Bank of Canada until 2023, recently told CBC News that Canada is getting collectively poorer relative to other countries.
Housing is a big reason for the exodus. And much of the problem is a result of wounds that are self-inflicted.
To fix the situation, we must take swift, decisive action to lower taxes and overhaul the approvals system. We can not simply bury our heads in the sand and hope for the best.
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.
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