Ontario’s housing affordability crisis will require more than short-term government measures, according to a new report from the residential construction sector.
The report argues that taxes, development charges and other government-imposed costs now account for roughly 36 per cent of the price of a new home in Ontario, placing a significant burden on buyers and contributing to the province’s affordability challenges.
Recent measures, including the temporary HST rebate on new homes and the Canada-Ontario Housing Cost Reduction Program, are seen as positive steps. However, the report says these initiatives need to become permanent if governments want to make a lasting difference.
Development charges remain a major obstacle
Development charges (DCs) are among the largest costs added to new residential construction. Municipalities collect these fees to help finance infrastructure such as roads, water and wastewater systems, parks and community facilities required to support population growth.
In several Greater Toronto Area municipalities, development charges can exceed $100,000 for a single-family home. When combined with other municipal taxes and fees, the additional costs can reach as much as $200,000 in some cases.
The report argues that these expenses are ultimately passed on to buyers and renters rather than absorbed by builders.
It also questions whether new homeowners should bear such a large share of infrastructure costs when existing residents benefit from the roads, parks, libraries and recreational facilities that growth helps finance.
Temporary relief creates uncertainty
The report highlights the recently announced housing cost reduction program, which allows municipalities to receive government funding if they reduce residential development charges by between 30 and 50 per cent or more and maintain those reductions for at least three years.
While the initiative could lower construction costs, the report argues that a three-year reduction does not provide enough certainty for an industry where projects and infrastructure investments can take years or even decades to plan and complete.
The same concern applies to the temporary HST rebate on new homes.
The rebate, introduced by the federal and Ontario governments, can provide eligible homebuyers with tax relief of up to $130,000. According to the report, the measure has already had a significant impact on new-home sales.
Ontario recorded 8,410 new-home sales during the first three months following the HST reduction, compared with 3,645 during the same period a year earlier — an increase of about 130 per cent.
Industry calls for permanent measures
The report argues that these figures demonstrate how reducing the tax burden can stimulate demand at a time when new-home construction needs stronger support.
It also maintains that development charges are an inefficient way to finance infrastructure because their costs become embedded in home prices and are effectively financed through long-term residential mortgages.
The residential construction sector is therefore calling for the HST rebate and development-charge reductions to be made permanent.
According to the report, long-term tax certainty would give builders, municipalities and buyers greater confidence while helping improve the economics of new-home construction.
The broader argument is that governments should stop treating new housing primarily as a source of revenue and instead recognize it as essential infrastructure for Ontario’s economic and social future.
