Despite an optimistic start to 2026, housing construction in Ontario has fallen short of provincial policy goals for years.
The Ford government once pledged to build 1.5 million new homes by 2031 but has since called that promise a “soft target.”
For the past two years, growth in Ontario’s housing supply has lagged behind scores of other provinces.
Thankfully, the Ford government finally appears ready to embrace at least one bold policy to try to boost the province’s ailing housing market.
A key part of Budget 2026 will reportedly be a plan from Finance Minister Peter Bethlenfalvy to lower home prices for potential buyers by addressing the taxation side of the equation.
According to media reports, Bethlenfalvy will announce that the province now plans to take the provincial portion of the HST off newly constructed homes for all buyers, a major step forward in getting families to purchase newly constructed homes and increase the province’s housing supply.
This is a major reversal from last fall, when Bethlenflavy announced plans to waive the provincial portion of the HST off newly constructed homes only for first-time homebuyers on homes up to $1 million, and lower rebates for homes costing up to $1.5 million.
The major deterrent was this: many Ontarians who already own a starter home or condo wanted to upgrade to a new build, but a huge tax burden was standing in their way.
Consider this scenario. The Jones’s own a small two-bedroom condo. They’re having their first child and want to upgrade to a newly built townhouse. Here’s the problem: because the Jones family technically already owned a “first” home, they couldn’t qualify for the provincial rebate.
That means, if the Jones family were to buy a $1-million townhouse, they would be stuck paying $130,000 in sales taxes, including $80,000 to the province of Ontario.
But if the Jones family were to buy a home that someone else had already lived in – in other words, what’s not considered a new build – they wouldn’t have to pay sales tax at all.
What, then, is the incentive for the Jones family to buy a new build?
There is none.
Imagine, because of all of the taxes, the Jones family simply decides to stick it out and welcome their baby in their existing condo.
For some families, this is a very real reality.
But the province should want to get families into newly built homes, because that opens up other existing housing stock for other families who may want to buy the Jones’s two-bedroom condo.
Facing years of poor housing statistics, that seems to be something that the folks running Queen’s Park have finally figured out.
The other important part of the tax side of the equation when it comes to housing is development charges, and that’s something that is increasing prices that the municipal level.
The Ford government has talked a lot about municipal development charges, but the truth is action can only come from the municipal politicians.
The City of Toronto, for example, has the highest development charges in Canada, according to the Canada Mortgage and Housing Corporation. Development charges add up to $180,000 to the cost of the average single, detached unit.
Until municipal politicians end their addition to development charges, high prices are going to continue to price potentially buyers out of the market altogether, slowing the growth of housing supply.
There is some precedent here. Vaughan, under the leadership of Mayor Steven Del Duca, cut development charges by 47 per cent in the fall of 2024 in a bid to boost housing supply and affordability. And cities have to balance their books every year, so Vaughan did so while finding room in its existing budget.
Municipalities must follow Vaughan’s example in order to get housing costs down. If cities cut development charges, in concert with the Ford government’s HST relief, this could make a major difference in getting Ontario’s sluggish housing sector back on its feet and ensuring that more homes are, in fact, built faster.
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.
