Building taxes should go to housing supply
April 25 2023
The Residential Construction Council of Ontario (RESCON) is calling on the federal government to begin directing more of the tax revenue it collects from new home construction into housing supply and public infrastructure.
“The federal government is benefitting massively from the growth of the Ontario economy but not reinvesting enough of the tax revenues it receives from new housing development into public infrastructure,” says RESCON president Richard Lyall. He argues the province and municipal governments are bearing too much of the cost during a “generational housing crisis.”
Taxes on the purchase of a new home in Ontario account for 31 per cent of the price—up from about 24 per cent in 2012, according to the Canadian Centre for Economic Analysis. Its study found the federal government’s share of those taxes is 39 per cent, yet it only invests 7.1 per cent in public infrastructure.
The report also indicates the tax burden on new home construction is two times higher compared to other sectors of the economy. Infrastructure-dependent products and sectors such as cars, electronics and manufacturing are not taxed nearly as much.
While Ontario’s population has grown by 68 per cent since the 1970s annual new housing completions has dropped by 23 per cent, Lyall noted.
RESCON’s report suggests public infrastructure investment funding in Ontario required to support growth trends is 30 per cent below what is required.
“This ongoing lack of support is one of the reasons we have the worst housing affordability crisis in Ontario’s history,” Lyall said. “It is very difficult for developers and builders to build more homes—and for the public to afford them—when taxes account for such a large chunk of the cost and the funds are not being properly reinvested into public infrastructure for the future. It’s a travesty.”