Governments Realize Action Is Necessary on Housing Front

As the old saying goes, “It’s better late than never.”

That’s how the residential construction industry is viewing government reforms that have been presented that will cut red tape, reduce the tax burden on new housing, and speed up approvals.

The measures – introduced by the federal and Ontario governments – are long overdue but certainly welcome. Rather than miss the opportunity, the governments recognized action is necessary.

At the federal level, the government has committed to a rebate on the GST on homes at or under $1 million for first-time homebuyers, as well as pledging to reduce it on homes between $1 and $1.5 million.

Previously, the feds eliminated the GST on the construction of new rental apartments and announced they would be cutting development charges (DCs) in half on multi-unit residential projects.

At RESCON we would like to see the Ontario government now follow the federal lead and cut the provincial sales taxes for first-time buyers on the purchase of a new home. However, this is a critical first step. 

If Ontario does follow suit, it would have a tremendous impact on the industry. On a $1-million home, buyers would save $50,000 in federal and $80,000 in provincial sales taxes, for a combined savings of $130,000.

The federal GST rebate is available to a first-time buyer who purchases a new home from a builder. Buyers are also eligible if they build or hire someone else to build a home on land they own or lease, or the buyer purchases shares of a co-operative housing corporation.

Ontario Takes Steps

The Ontario government, meanwhile, has also taken action and passed the Protect Ontario by Building Faster and Smarter Act that will standardize development charges (DCs) levied by municipalities. 

Developers will also be able to remit DC payments when a dwelling is occupied, rather than when a building permit is issued, thereby saving on the cost. This will benefit buyers as they are ultimately on the hook for the payment.

A number of municipalities are to be commended for taking the lead on DCs ahead of the federal announcement.

Earlier, the City of Vaughan approved a 50-per-cent cut to its DCs, while the City of Mississauga committed to reducing them by 50 per cent for new builds, and 100 per cent for three-bedroom units in purpose-built rental buildings. In 2024, the City of Burlington passed a bylaw to reduce DCs which brought forward an approximately $1,500 reduction to the per unit DC rate.

Call for Action

For years, builders have been calling on governments to do something about DCs, red tape and slow approvals. It’s been akin to watching a slow-moving train wreck, as the time it takes to get a project approved became longer, runaway DCs trended dramatically higher, and bureaucracy got worse.

Approval times, meanwhile, continued to grow. A report done by Altus Group for the Ontario Association of Architects (OAA) revealed that Ontario municipalities are taking an average of 23 months to review site plan applications – far exceeding the provincially mandated 60-day timeline. 

It currently takes longer to approve a new housing development on paper in a GTA municipality than it does to physically construct the new housing project.

The delays have significant financial repercussions, according to the report. For a 100-unit apartment building, site plan holdups result in additional monthly costs ranging from $230,000 to $299,000. 

The report suggests that the broken site plan approval process is costing about $3.5 billion annually in lost opportunities and inefficiencies, a staggering increase from the $900 million estimated in 2018.

Grim Housing Picture

Given the catastrophic market slump we are facing, something had to give.

Housing sales and starts have slumped to a low not seen in 35 years. Toronto area new homes sales in April marked a seventh consecutive month of record all-time lows. There were 310 new home sales in April, down 72 per cent from April 2024 and 89 per cent below the 10-year average. 

Historically, new home sales for a typical April in the GTA would be 2,750 units based on the previous 10-year average.

Governments are traditionally not good at reducing taxes, cutting red tape or repairing failed and slow systems. However, both the feds and the Ontario government appear to have smartened up.

There is little doubt that further incentives and tweaks will be needed to tackle the housing supply and affordability crisis. But the recent actions are progress.