Canada needs more permanent solutions to its housing problem

Brad Carr is the chief executive of Mattamy Homes.

Earlier this year, Ontario and the federal government announced an HST rebate for all new homes in Ontario, a move that helped make homes more affordable for buyers and kept workers building through what otherwise could have been an even more disastrous slowdown. Important work between municipal, provincial and federal governments has also started to reduce development charges, the hidden taxes and fees on many new homes.

The HST rebate’s impact was immediately visible in key sectors of the market, buyers returned to low-rise sales centres across the province and second quarter sector-wide sales increased 130 per cent year over year.

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These new housing measures demonstrate important progress, but a healthy home building sector and affordability require much more. They require long-term structural reforms that sustain affordability, improve the path to home ownership, reduce the cost of building homes, and increase supply.

Why? Broad economic challenges are being felt in the housing market: National home sales fell 7 per cent year over year in August, despite being a traditionally busy month. This slip was echoed in a modest slowdown in housing starts. While national figures tell part of the story, distinctions exist across regions and housing types, with different market dynamics playing out in cities such as Toronto and Vancouver and across both low-rise and high-rise housing. To address Canada’s housing crisis, we need to build more housing of all types in all regions.

Those market realities highlight the limits of recent short-term solutions.

That’s precisely why we need to think longer-term when the HST rebate ends at the end of March 2027.

Instead of another stopgap, we should return to the roots of this policy. The housing sales tax rebate was first introduced alongside the GST in 1991 and updated when the HST followed in 2010 to ensure the taxes did not create a barrier to housing affordability. Thirty-five years ago, the federal threshold at which a home buyer could receive the GST rebate was set between $350,000 and $450,000; however, it has not been revisited since. Adjusted for inflation, a home that was $450,000 in 1991 would cost approximately $972,000 today, according to the Bank of Canada’s inflation calculator. When the recently introduced Enhanced HST rebate runs out in March 2027, we will revert to that outdated policy if nothing is done.

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So, let’s permanently update the policy by increasing the threshold and eliminating the HST on the first $1-million of the cost of a new home, while also establishing a two-year review mechanism that adjusts this threshold as necessary based on inflation and other criteria. This would restore the original intent of the policy and ensure its relevance in perpetuity across Canada’s diverse housing markets.

We can also reduce the burden of new home ownership, especially for young or first-time buyers, by allowing homeowners to deduct mortgage interest payments from their taxable income. The home building industry has raised the idea with the government, as first reported by The Globe and Mail. This tax change would be linked to the tax-free capital gains exception for the sale of a primary residence. In essence, it would allow homebuyers to enjoy those benefits when they are first getting into the market or just starting their careers instead of “banking” them in capital gains benefits from the eventual profits from the sale of their family home years or even decades down the line.

Prices on new homes can also be decreased by restructuring how we build and pay for housing-enabling infrastructure. As the government works with investors, pension plans and the private sector to attract investment dollars to infrastructure, we should consider how that capital can support municipalities in building the roads, sewers, parks and bridges required to grow their communities and permanently remove hidden fees and taxes for new homeowners.

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If we are committed to focusing on what we can control to grow Canada’s economy in an era of massive change, healthy home building must be top of that list.

Home building employs about 880,000 people across Canada each year, and that jumps to 1.2 million when including the repair industry. According to the Canadian Home Builders Association, that’s $90-billion in wages and $213-billion in economic activity made right here in Canada.

As a nation, we cannot afford to move on from the housing discussion until long-term permanent solutions have been achieved. The path to a stronger Canada runs through a stronger housing sector, one that can build more homes faster – and meet the needs of future generations.