Last Updated on May 14, 2024 by CREW Editorial
Canada is cratering in many ways and the housing supply and affordability crisis appears to be getting worse.
The stock of new housing is falling – at exactly the time we need it to rise. Many folks – especially the younger generation – can no longer afford to buy a home and live in the cities where they work. They are seeking housing elsewhere, often out of province and sometimes out of country.
Average home prices in Toronto, for example, are now less affordable than Tokyo, New York City, Miami, Seoul and Melbourne, according to an analysis of home prices in 23 metropolitan areas across North America and various other countries done recently by Zoocasa.
The average home price in Toronto now stands at $1.122 million while in Vancouver the figure is worse at $1.197 million.
The embarrassing predicament is only getting worse. Recent federal and provincial budgets, while positive in some respects, did not go far enough on housing and will not move the needle.
Decline in housing starts
Canada Mortgage and Housing Corporation reported in its spring housing market outlook that there is expected to be an overall decline in national housing starts this year, led by Ontario and B.C.
The reason?
Unfavourable financing conditions and labour shortages are expected to make many rental building construction projects unfeasible, despite government incentives like dropping the HST.
Condo developments are also being delayed. The new condo segment in the Greater Toronto and Hamilton market remains sluggish. Developers have pulled back because buyers aren’t ready to purchase.
In the first quarter of this year, only four new condo projects were brought to market in the GTHA, according to research and consultancy firm Urbanation. About 60 projects are now on hold.
Meanwhile, mortgage delinquency rates in Toronto have surged 71-per-cent higher in just one year, according to Equifax.
Equally troubling, an article in Better Dwelling noted that Canada has embarked on an epic borrowing spree as new direct and guaranteed bonds issued by the federal government jumped in March. This is problematic as it could put upward pressure on borrowing costs for investors.
Governments at all levels need to understand that we have a market economy. The role of government is to regulate the playing field, so it works as effectively as possible – not play the game.
To turn the ship around, we must lower the costs associated with buying a new home in Canada.
Buyers burdened with taxes
Simply put, new housing is overtaxed. Governments need taxes to fund essential services but those who are buying new homes are unfairly burdened with high taxes, fees and levies and development charge hikes. About 31 per cent of the cost of a new home is due to the add-ons.
Taxes, fees, levies and development charges have exploded. For example, they’ve increased 800 per cent in the last 20 years. In 2023, development charges alone in Ontario were up 72 per cent over the figure for 2019. Wages have certainly not kept pace with those types of hikes.
Sadly, it appears that the City of Ottawa hasn’t seen the light. In fact, they are making it more difficult for people to buy homes. The planning and housing committee recently approved a new bylaw which will result in a $4,700 to $6,200 hike in fees on new homes built in the municipality.
Charges on single and semi-detached homes inside the Greenbelt will increase from $43,494 to $48,265, while they will increase from $51,376 to $57,596 on homes built outside the Greenbelt.
The first-time buyer, in particular, is being crushed by these add-ons. They need – and deserve – a break.
Give first-time buyers a break
RESCON has suggested that the federal government rebate the Harmonized Sales Tax (HST) to first-time buyers who purchase a new home. They are doing it for purpose-built apartment rental buildings. The same should be done for first-time new home buyers.
We must make it more affordable for people to own a home and stop taxing new housing out of existence.
Can you imagine cutting 30 per cent off the cost of a new home? It would certainly give people a realistic gateway to home ownership and spur developers and builders to take action.
Changes like these must happen immediately.
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.
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.
