The Ford and Carney governments are going back to the drawing board to try to spur more housing activity after previous policies fell short of the mark and housing starts remain far short of previous expectations.
Late last year, both governments announced that they would rebate the HST on new homes worth up to $1 million and offer partial rebates on new homes worth up to $1.5 million for first-time home buyers. The major problem with that is that the majority of home buyers, who are not first-time home buyers, didn’t qualify for the rebate.
Getting folks who aren’t first-time home buyers into newly built homes should still be a priority. After all, those individuals will be moving from other homes, which will then be put on the market and could be sold to first-time home buyers. Allowing all home buyers to access the HST rebate will help spur housing demand at a time when the market clearly needs it.
Recognizing that reality, Ontario Premier Doug Ford announced last week that the federal and provincial governments plan to extend the HST rebate on newly built homes to all home buyers for a period of one year, beginning on April 1, 2026.
While this extension is good news, a longer extension would have been preferable. Limiting the rebate to a period of just one year may spur demand in the short term, but will leave uncertainty in the long term, and could lead to a drop in demand a year from now if the policy is not extended. Both governments should be looking to give the housing sector as much certainty as possible, and short-term plans leave much to be desired.
One of the reasons the housing crisis is such a difficult issue to tackle, however, has to do with the fact that multiple levels of government are involved, including municipalities.
For example, a huge issue is municipal development charges, which are fees that local governments charge to cover the cost of new infrastructure and services. While new home buyers don’t see the cost of these charges when they buy a new home directly, they are very much a part of the story. In Toronto, the average new home includes $180,000 of municipal development charges, a shockingly high number that plays a huge role in driving up housing costs in Canada’s largest urban centre.
Some municipalities have shown that when there’s a will, there’s a way. Vaughan, for instance, under Mayor Steven Del Duca cut development charges virtually in half back in the fall of 2024. That’s a path other municipalities are going to have to follow to allow housing to become more in reach for potential home buyers.
But because too many municipalities, particularly in Ontario, having been hiking development charges and making new housing unaffordable for potential buyers, the Ford and Carney governments announced Monday plans to offer provincial and federal funding to help cut municipal development charges by up to 50 per cent, yet another move that will help to get costs down.
One final issue that needs to be put on the table is zoning reform. Red tape from all three levels of government forces developers to often wait years on end for rezoning to be approved. Approvals for multi-residential buildings, something desperately needed to increase housing supply, take as long as 25 months in Toronto. That’s more than two years of waiting before developers can actually get shovels in the ground and start to get new homes built, which is a big reason why Canada’s housing supply numbers are lagging behind governments’ goals.
Fees associated with zoning reform are also a huge problem. In the Greater Toronto Area, as an example, fees averaged $116,000 per low-rise unit and $79,000 per high-rise unit. Thus, not only are issues associated with zoning slowing down the housing construction process, but they are also adding to the cost.
Extending the HST rebate on newly built homes to all home buyers is a good step. So too is offering funding from the province and the federal government to help cut development charges. But zoning reform still needs to be put on the table. To truly fix the housing crisis, all three levels of government are going to have to work together to solve problems that have been building up over decades but demand solutions now. Recent announcements represent a good start, but there’s more work to be done.
Jay Goldberg is the Canadian Affairs Manager at the Consumer Choice Center. He previously served as the Ontario Director at the Canadian Taxpayers Federation and a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.
