Stop Taxing Homes Out of Existence

Goals

Reverse the crushing tax burden on housing development that has made homes unaffordable and throttled supply. By dramatically reducing the taxation of new housing construction, we can stimulate building, lower housing costs, and help millions of Canadians achieve homeownership. Our targets:

• Reduce the total tax burden on new housing from 36% to under 20% within three years
• Increase annual housing starts by 30% by 2028, adding at least 100,000 new homes per year above current projections

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Background and Motivation

Canada's housing market is failing ordinary Canadians. A young family today faces housing costs that have risen far faster than incomes, pushing the dream of homeownership beyond reach for millions. At the heart of this crisis lies a fundamental problem: we're taxing the creation of new homes as if we want fewer of them, not more.

Governments tax cigarettes heavily to reduce their consumption. Today we are applying the same approach to housing, with taxes now accounting for 36% of the purchase price of a new home in Ontario¹. This tax burden is over twice the average tax burden imposed on the rest of the economy². On an average-priced new home in Ontario of about $1,070,000, consumers are paying around $381,000 in various taxes and fees³.

These taxes are messy and spread across the municipal, provincial, and federal level including GST/HST, land transfer taxes, and more. However, the most pressing issue is with local “Development Charges”, one-time taxes that are paid by a developer when creating a new house. The situation has deteriorated rapidly. In 2010, Toronto development charges had reached $12,910. Since then they have increased a further 993% to $141,139. This massive growth far outpaces inflation, which rose only 41% during the same 14 year period⁴. 

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These taxes directly impact the cost of a new home, and as a result, the number of new homes that can be built. This difference prices many families and young people completely out of the market, preventing the home builder from selling that home, and ensuring that fewer homes get built. This vicious cycle further inflates the price of homes as new supply dwindles while demand remains high.

But the cycle is only getting worse. In 2024 alone, Toronto raised development charges twice, totalling a 40% increase, while housing starts lagged and new home sales hit record lows⁵.

The reason this has happened is understandable but deeply counter-productive. Municipalities face severely limited funding options, forcing their growing reliance on property taxes and development charges. As cities grow, infrastructure costs for water, sewage, roads, and community services must be covered. Rather than distributing these costs broadly through various measures, municipalities transfer them directly onto new homebuyers through development charges. This approach creates a dynamic where those struggling the most to enter the housing market–young families and first-time buyers–bear the heaviest financial burden.

The consequences are clear. Industry experts warn that increased development charges are making many housing projects economically unviable. Richard Lyall, president of the Residential Construction Council of Ontario, predicts "cancellation of projects" due to fee increases⁶. In Ontario, despite the population doubling since the 1970s, in 1973, Ontario saw 110,536 new home starts, while in 2023, there were 89,297 new home starts – a decrease of approximately 19% in the total number of housing starts over this 50-year period⁷. The Canada Mortgage and Housing Corporation (CMHC) found that government charges add complexity and uncertainty to the development process, creating investment risk and slowing construction timelines⁸.

The federal government collects 39% of tax revenues generated from new housing while contributing only 7.1% to Ontario's public infrastructure investments⁹. This disconnect between taxation and infrastructure investment represents a systemic failure that undermines the justification for many housing-related taxes. The government has become the largest beneficiary of new home construction, collecting three times more than builders and suppliers combined.

There are solutions. Even within Canada, other areas have managed to keep the tax burden low and with it housing affordable.

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Real-World Solutions

Calgary, Alberta, serves as a compelling example of how lower development charges can stimulate housing construction. In contrast to Ontario municipalities, where a single-family home includes $141,139 of development charges, Calgary's charges are significantly lower. Development charges on a comparable new home in Calgary are approximately $22,000¹⁰.

By maintaining lower development charges, Calgary has effectively reduced the financial barriers for developers, leading to increased housing supply and contributing to more affordable options for homebuyers. This approach demonstrates that municipalities with lower development charges can successfully stimulate housing construction and improve affordability.

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What Needs To Be Done

Let’s transform Canada's approach to housing taxation by reducing the overall tax burden, removing barriers to development, and creating incentives for new construction.

• Reform Municipal Development Charges. Require municipalities to freeze or reduce development charges at no more than $50k per unit to qualify for federal infrastructure funding. This will prevent the continued explosive growth of these fees that has seen charges increase by nearly 1000% in Toronto since 2010. Also require municipalities to demonstrate that development charges directly connect to the infrastructure needed for new housing, preventing them from becoming stealth general revenue tools that make homes unaffordable.
  

• Eliminate GST on New Homes. This will immediately make new housing more affordable while addressing the wide regional price variations across the country.
  
  
• Create Home Builder Tax Incentives. Establish a performance-based tax credit system that rewards increased housing starts, comparing increases against 2025 baseline levels. If developers are building incremental new homes, they will be able to deduct development expenses against current income and benefit from an expanded Manufacturing and Process program for housing construction activities. The GST Rebate can be extended from purpose-built rental housing to for-sale condominium construction. This will make new units of housing profitable at significantly lower prices where sales will be stronger, incentivizing builders to create the homes that will solve our housing crisis.
  
  
• Harmonize Housing Taxes Across Jurisdictions. Work continuously with provinces and municipalities to create a national framework for housing taxation that eliminates duplicate taxation, establishes consistent principles, and reduces the complexity that adds costs and delays to housing development. Today, there are many different interests involved in the taxes on new homes, but through strategic efforts this can replace the current fragmented approach where multiple levels of government apply overlapping and uncoordinated taxes.
  
  
• Incentivize Commercial-to-Residential Conversions. Establish time-limited tax benefits to accelerate the conversion of underutilized office buildings to residential use. These will include accelerated capital cost allowances for conversion expenses, GST/HST exemptions on conversion costs, and property tax rate guarantees to provide certainty during transitions.
  
  
• Create Housing Tax Transparency. Establish a comprehensive database tracking all housing-related taxes, fees, and charges across Canada, publishing an annual Housing Tax Burden Report to monitor progress in reducing overall taxation on new housing development. This transparency will drive accountability at all government levels.

Progress will be measured through quarterly housing starts data and tracked against our target of increasing annual starts by 30% within three years. The new Housing Taxation Advisory Council will monitor implementation and recommend further reforms as needed. Initial tax changes will take effect within six months, with comprehensive reform complete within 18 months.

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Common Questions

Won't reducing taxes on housing development primarily benefit wealthy developers rather than homebuyers? While developers will initially see reduced costs, competitive market forces will push savings to homebuyers. The government can monitor price impacts and require transparent reporting on how tax savings flow through to consumers. The housing market's current supply shortage means more housing development benefits all Canadians by moderating price growth.

How will municipalities maintain essential infrastructure funding if development charges are reduced? Federal infrastructure grants could be tied to development charge reform and alternative funding models that distribute costs more equitably across the tax base could be explored. The increased economic activity from more housing construction will generate additional tax revenue through other channels.

Could these tax changes overheat the housing market and cause a bubble? These reforms target the supply side of the equation – increasing housing stock, not stimulating demand. By focusing on production incentives rather than buyer subsidies, this will create sustainable market growth. Regular monitoring of market conditions will allow for adjustments if needed.

Why focus on taxation rather than other barriers to housing construction like zoning and permitting? Comprehensive housing reform requires addressing multiple barriers simultaneously. While there are also changes needed on zoning and permitting improvements, taxation is a critical factor that directly impacts project viability. Every element of the housing ecosystem must be reformed to solve the crisis.

How will you ensure tax incentives create affordable homes, not just luxury developments? These tax incentives will be structured to reward volume and affordability, with enhanced benefits for projects that include affordable units. By increasing overall supply at all price points, this creates movement throughout the housing market, freeing up more affordable options as people upgrade. Evidence shows even market-rate construction helps moderate prices across the entire housing spectrum.

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Conclusion

Canada's housing taxation system has evolved into a counterproductive mess that treats new homes like harmful products we want to discourage. By implementing these reforms, we can remove the tax barriers that currently prevent tens of thousands of homes from being built. The result will be more homes, more jobs, and greater prosperity for all Canadians. We must act now to ensure the next generation of Canadians can afford homes in the communities where they want to live and work.

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