The $6.6 Billion Housing Disaster Politicians Won’t Talk About

If 41,000 jobs were lost in the automotive sector you'd be hearing a lot about it but home construction is a fragmented industry and the job losses are spread out

Meredith Martin

Mike Moffatt

, and

Sabrina Maddeaux

Jul 16, 2025

Toronto’s housing market is in free fall — new condo sales have plunged 97% since 2021, costing governments $6.6 billion in lost tax revenue every year. In this episode, Sabrina Maddeaux and Mike Moffatt break down shocking new data on record-low home sales, how this impacts construction jobs, and why the crisis could get worse before it gets better. They explain how cutting taxes, such as the GST, could revive housing starts without sacrificing affordability, and debate whether foreign buyers and international students should play a role in the market recovery. Don’t miss this deep dive into the numbers and policy ideas that could reshape Canada’s housing future.

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Below is an AI-generated transcript of the Missing Middle podcast, which has been lightly edited.

Sabrina Maddeaux: So, Mike, our friends at Altus Group recently released some sales data. In May, new home sales in the GTA hit a record low for the eighth straight month. And in the city of Toronto, only 42 new condos were sold that month. So think about that for a second. Toronto has 3 million people living in it, and only 42 new condos were sold in a month. Like that's nuts. For context, that's a 97% decrease since May, 2021.

Mike Moffatt: Yeah, absolutely. Like things are terrible right now. And I don't think it's understood how bad things are. That, you know, we hear politicians talking about double housing starts or whatever. And in the meantime, at least in the GTA and to a lesser extent, the greater Vancouver area, things are absolutely at a standstill. And this has all kinds of ripple effects.

We recently wrote an article about it. We'll link to it in the show notes. But, you know, not only are we seeing housing starts and housing sales basically evaporate, but the unemployment rate in the GTA is 9.7%. And that's a rate that you normally only see in things like a recession or a financial crisis. And we've shed nearly 12,000 jobs in the construction sector across Ontario over the last 12 months. So it's this kind of perfect storm of bad economic activity coupled with a housing market that has just completely frozen in the GTA.

Sabrina Maddeaux: Yeah, the unemployment rate's even worse for young people, which we've also spoken about in a previous episode we'll link to in the show notes.

Now, I distinctly remember the Ontario government pledging to have 1.5 million new homes by 2031. And the Fed's also promising to help double housing starts. And the country's largest housing market is in free fall.

So, across all the GTA in May, sales of newly constructed single-family homes were down 70% compared to the last 10 years and condo sales were down 90%. And this isn't a one month blip we're talking about. Sales have been in a steady decline for the last few years.

So Mike, you estimated that if these trends do continue, governments could lose $6.6 billion in tax revenue a year. How did you come up with that crazy figure?

Mike Moffatt: Yeah, it's pretty shocking, isn't it? And I guess it just shows how reliant all three orders of government are on home building and home sales to finance their activity.

So to be clear, this was a back-of-the-envelope estimate where we combined a couple of different studies. And unfortunately, there will be a little bit of math here, but we'll try and keep it pretty simple.

So the first scenario was a scenario analysis conducted again by Altus Group, but a different study. They basically said, ‘okay, if current trends continue, single family homes - so that's single detached townhouses, that kind of thing - they're seeing those fall in sales from 10,000 to 3,000 a year.’ So, a 70% decline, 7,000 units. On the condo side, they're seeing that absolutely evaporate. Over the last 10 years, we've averaged about 22,000 sales of condo units a year. They're seeing that drop to about 2,000. So that would be a decline of 20,000 homes. So you put those two things together, that's 27,000 fewer new homes sold and constructed each year just in the GTA.

So then what we did with that number is we combined it with a study from the Canadian Center for Economic Analysis (CCEA), which basically shows how much tax revenue every new home generates when it's constructed. And some of that's obvious, the stuff that we talk about here, like development charges, land transfer taxes, GST on new homes, and so on. But the CCEA analysis also includes things like income tax paid by the workers who build those homes, corporate income tax paid by the builders and developers of those homes, and so on. So you can basically combine those two things. If we know that there are 27,000 fewer homes that are gonna get built, multiplied by the amount of tax revenue generated by each home, you can figure out a total amount.

Now, we have to recognize that condos are less expensive than single-family homes, and that they generate less tax revenue. So, to be very conservative, we basically treated condos as being half a home. But even if you do that, go, ‘okay, we'll treat single-family homes as full size, condos as half size’, you still put that together and you get $6.6 billion in lost tax revenue under that scenario. And that's across all three orders of government.

Because of the assumptions we made, like treating condos as half a unit, I think that estimate is very conservative. I think the true cost is likely higher, but overall, they're alarming numbers. Like, we're showing that development charge revenue is gonna fall by $2 billion a year. That's gonna make it awfully difficult for municipalities to build the infrastructure that they need.

Sabrina Maddeaux: Yeah, that's shocking that that's actually a conservative figure you came up with.

So that loss of 27,000 homes a year in the GTA alone is a massive number. And I know our housing start numbers are bad, but they're not that bad. So why isn't this huge drop in home sales reflected in the housing start numbers?

Mike Moffatt: So this is the number one thing I think politicians and analysts, and the media can often get wrong, is that we are so conditioned, myself included, in looking at housing starts as our measure of the health of a housing market. And housing starts in Toronto aren't great. I mean, they've dropped about 30% in the GTA, which is not good, but it's not these 70 to 90% drops we're talking about.

Well, the challenge with a housing start is that it basically reflects the state of the market two or three years ago. Because there's a lot that goes into a housing start that…let's say you're gonna go ahead with a project, you've done enough pre-sales on your condo, you can go forward. Well, you still need to get all your permits, you still need to get all your approvals, you still need to get your team of builders and workers together and so on to get this thing built.

But also, the way the CMHC counts a housing start, most people would assume that it's like the first time a shovel goes into the ground, or a bulldozer goes in, and what have you. But it's actually when the foundation is completed, and the foundation is completed enough that you have started construction at the ground level. So, everything underground foundation-wise is done. Well, that could take a year or more for a high-rise.

So if you're looking at high-rise housing starts in 2025, that might reflect shovels in the ground from 2023 and pre-construction condo sales from like 2021 or so. So housing starts are a very important metric, but they're what economists call a lagging indicator. They come last. They don't show the current health of the market, but they show what the health of the market was two to three or four years ago.

Sabrina Maddeaux: So, new home sales are down. And from what you just said, new housing starts are on their way to plummeting. It seems pretty obvious that that would lead to a contraction in the construction industry. What would that mean for jobs?

Mike Moffatt: Yeah, so construction is already down 12,000 jobs, and that's not all housing-related. We are seeing declines in the manufacturing sector. So we're building fewer factories and warehouses and things like that. But we also have to keep in mind that there are a lot of jobs in home building that aren't construction-related. Think sales and marketing, accounting and finance and so on. So the Altus Group scenario analysis finds that there would be 41,000 jobs lost across the GTA if these trends continue. And that's a combination of construction jobs, those second-order jobs like marketing, sales, finance, and so on. But also they take into account that if you have fewer construction workers working, they're going to go to restaurants less, they're going to be spending less and so on. So they also consider all of those spinoff effects. They consider the fact that they're gonna be buying less lumber, right? So there's an entire supply chain effect here.

41,000 jobs would be absolutely massive at a time when, again, we're at unemployment at 9.7%. And one of the challenges is that because these jobs are spread out all over the place, it doesn't get as much attention.

I can tell you as somebody who has a background in manufacturing and automotive, if the automotive assembly sector was gonna lose 41,000 jobs, it would be a national emergency, and there would be headlines. There would be bailout packages. I think all of that's appropriate. But if we're losing 41,000 jobs in home building, nobody really seems to notice because it's a few jobs here, a few jobs there.

You're not dealing with these massive multinational corporations, and all of the job losses aren't happening at one or two or three firms. It's spread out all across the place.

Sabrina Maddeaux: Now, your piece makes what would seem like a counterintuitive argument to some people. You say that governments are going to lose $ 6.6 billion a year in tax revenue because of this GTA housing crash. But at the same time, you're also suggesting cutting the GST on new housing. Can you explain how that makes sense?

Mike Moffatt: Yeah, absolutely. We've already gotten that feedback from a few readers, and I expect it to get more. But what we have to understand is that if we want home building to continue, we also want lower prices, because we have to understand that prices have to come down in the GTA. I can say that because I'm not the housing minister, but prices absolutely have to come down, and they are. But the challenge is that if prices go down too much and nothing else changes, then you're not going to build any homes. That ratio between prices and costs just doesn't work anymore. It's just not financially viable. And that's for both for-profit and not-for-profit builders. So the only way you can have lower home prices and robust housing construction is if costs go down.

Now, some of those costs will go down naturally. If there's less home building, the price of land will fall and so on. But there are a lot of other costs we can't control. We can't control the cost of materials. We can't control the cost of appliances and things like that. And in fact, many of those things are getting more expensive because of ongoing trade disputes with the United States. So those costs aren't going down. Yeah, you could cut labour costs a little bit, but we probably don't want to do that, right? Because we want blue-collar workers, middle-class workers to earn a good income. So that shouldn't be the path we're looking for.

So you're saying, ‘Okay, well, where are those cost reductions going to come from?’ The most obvious place is taxes. That's the one cost that they can control. And that's things like GST. So, looking at updating our GST rebates for inflation, that's development charges and so on.

And we have to understand that there's a difference between tax rates and tax revenue. If municipalities set development charges to be 200, 300, $400,000 a unit, and we build zero units, they get zero revenue. And some politicians understand this.

So Stephen Del Duca made this exact argument to TVO, to Steve Pakin, when they cut their development charges. Because they would say, ‘Okay, we would rather have half of something than 100% of nothing.’ And I think governments are going to have to understand that these taxes are just not sustainable under the current market conditions.

For the same reason that home prices have to go down, so too do the taxes. You can't ask builders and developers to take smaller cuts and then not be willing to do it yourself. It just breaks the market.

So we need to see creative solutions. And that's not to suggest we don't need to see other things. We need to see home building become more productive. We need to see approval processes reformed and so on. But the single biggest and fastest thing we can do to lower home-building costs, to address the cost of delivery crisis, is to lower the taxes on new homes.

Sabrina Maddeaux: Now, there are people, not me, but there are people who are suggesting we have been too restrictive with international students, foreign buyers, and just immigration in general. And that's why the bottom is falling out of the market. And some, again, not me, are arguing we need to reverse course. Do you see that as an option?

Mike Moffatt: Well, we're already hearing that from some builders and developers that they would like to see the international student immigration changes reversed. So that talk is already happening. And I get that from their perspective. If I'm not able to build anything or develop anything, I would want that too. Because that would certainly help my business model.

Sabrina Maddeaux: Well, we know juices demand. That's not up for debate.

Mike Moffatt: It juices demand! Yeah, no, absolutely. But I think it is…we just end up going back to the other problems where it's like, yeah, home building's high, but we don't have affordability.

We need simultaneously to have both affordability and high housing construction. So we shouldn't make changes that boost housing construction, but at the cost of affordability.

Now, the one area I do think we can look at is foreign investment, particularly foreign investment in new housing. So we put in all of these foreign buyer bands, and things like that, because we didn't want international dollars buying up existing homes. I get that. I think that's a perfectly reasonable and acceptable thing to do. I think that makes sense. But what we have to understand is that foreign capital also helps build new homes. It's some of the pre-construction financing for condos. So I do think there is an area to say, okay, let's make sure that foreign capital is coming in. It's actually creating homes. It's not buying up existing ones. And this is what Australia does. Australia has a system similar to Canada's because it's had problems just like Canada, and it's instituted a foreign buyer ban. But they create an exemption in the foreign buyer ban that says, look, if you are international capital and you wanna come in and help us build homes, we're not gonna block your money. We will let you do that. But you have to be creating net new homes, not buying up existing units. So I do think that is worth looking at. The other piece is not so much, again, and I know that's gonna upset some of our builder and developer friends, but I don't think we should be looking to boost home building at the cost of affordability.

Sabrina Maddeaux: Yeah, I mean, I agree with that. I think that immigration has been an easy demand solution in the past, and I'm worried that we'll go right back there if people start to panic. I'm open to the idea that foreign capital can be useful in helping some of our supply challenges, but it would have to be so targeted because I would hate to see a situation again where we're seeing foreign buyers come in at the expense of affordability for Canadians or we end up with a Canadian renter class and all ownership is in foreign hands. So to do that properly would have to be very, very well thought out. Thank you, everyone, so much for watching and listening and to our fantastic producer, Meredith Martin.

Mike Moffatt: And if you have any thoughts or questions about how you can increase government revenue by lowering government taxes, please send us an email to missingmiddlepodcasts at gmail.com. We'll see you next time.