At 10:30 am, MMI’s Mike Moffatt and Alex Beheshti will be providing testimony to the Standing Senate Committee on Banking, Commerce and the Economy (BANC). The meeting will be livestreamed here.
Their opening remarks will be based on Mike’s piece Falling sales, falling jobs: Why Canada must cut taxes on new homes which was published at The Hub on Monday. Their opening remarks will be as follows:
Thank you for having us here today. My name is Mike Moffatt, and my colleague Alex Beheshti has also joined us; we are from the University of Ottawa’s Missing Middle Initiative. We’re a think tank devoted to helping create a Canada where every middle-class individual or family, in every city, has a high quality of life and access to both market-rate rental and market-rate ownership housing options that are affordable, adequate, suitable, resilient, and climate-friendly.
We’re here to talk about the decline in housing activity we’re seeing across Canada, particularly in large urban centres.
Across much of Canada, home prices and rents have fallen in recent years. For families that have spent years on the outside looking in, that should be welcome news. Yet affordability remains elusive. Home prices are still far beyond the reach of most middle-class households, while the cost of construction remains stubbornly high. In many markets, the total cost of building now exceeds what families can afford. This creates a paradoxical situation where homes are both unaffordable for buyers and uneconomic to build. The only sustainable path toward attainable prices and increased housing supply is to lower construction costs, which means cutting the taxes that drive those costs up.
Superficially, Canada’s housing starts appear stable, especially outside Ontario, but this is misleading. Housing starts reflect projects that were financed and sold during the boom years of 2021 and 2022. The real-time indicator is new home sales, and the picture there is grim. A report from the Missing Middle Initiative’s Jesse Helmer finds that new home sales across the Greater Toronto Area and the Greater Golden Horseshoe have declined by more than 80 percent from 2021 levels. The collapse extends beyond Toronto condos, affecting detached homes, townhouses, and mid-rise apartments nationwide, including in Vancouver and Calgary.
The Canada Mortgage and Housing Corporation warns that today’s drop in sales will translate into fewer housing starts tomorrow. Its latest forecast projects 30,000 fewer starts between 2024 and 2027. Using Statistics Canada’s employment multipliers, that decline implies nearly 100,000 lost jobs nationwide, including skilled trades, such as plumbers, framers, and electricians, as well as the workers who supply everything from windows to lumber. When 15,000 auto manufacturing jobs were at risk in 2008, governments took decisive action to preserve the sector. The stakes are far higher now, because housing isn’t a consumer good; it’s essential infrastructure. If tens of thousands of skilled construction workers leave the industry, the goal of doubling homebuilding becomes unattainable.
Governments claim to want more housing, yet their tax systems make it increasingly uneconomic to build. The combined burden of the GST, PST, development charges, and fees can add hundreds of thousands of dollars to the cost of a new home. When I bought a new home in London, Ontario, in 2004 for $168,000, the taxes and fees were under $16,000. Today, the taxes alone on a similar home are roughly that much. These costs directly determine whether a project can proceed, and as prices fall while taxes stay high, more builders are shelving projects.
Some argue that cutting housing taxes would result in governments losing too much revenue. In reality, the opposite is true. Our estimates show that the federal government will lose over $3 billion annually in forgone revenues from the GTA and Vancouver alone if construction continues to decline, exceeding the entire budget of the Build Canada Homes program. Taxing new homes out of existence is not a fiscally prudent approach.
Housing cannot be both a right and taxed like a luxury yacht. Ottawa imposes a 10 percent luxury tax on yachts worth over $1 million, yet a middle-class family buying a semi in Scarborough pays the equivalent of 15 percent in development charges and land transfer taxes, plus GST and PST on top of that. If we want to make quality homes affordable again, we must stop taxing them out of existence. The choice is clear: cut the cost of homebuilding now, or face the double blow of fewer homes and 100,000 lost jobs.
We look forward to your questions.