We Must Implement Fixes To The Housing Crisis

As we begin 2025, it’s time to face up to our dire housing crisis and come up with serious fixes to the problem. Failure to do so will inevitably affect our economic well-being and lead to grim consequences.

Like Captain James T. Kirk declared at the beginning of each Star Trek episode, it is time “to boldly go where no man has gone before.”

This year will be pivotal for the new housing market. We are at an inflection point, staring into the abyss.

In Ontario, the goal of building 1.5 new million homes by 2031 now seems but a pipe dream. In 2023, construction was started on only 110,584 new homes in the province. That figure included homes and condos, as well as long-term care beds, and additional residential units. Latest figures show that the sales of both new homes and condos are languishing at historically low levels in the GTA.

The condo market has taken a beating, with declining sales, increasing inventory and financial challenges for buyers and investors. Condo developers in Ontario have not been able to build units that people and families can afford due to high taxes and fees. Fewer cranes are now active in the GTA.

But the pain is not over. We expect that housing starts over the next few years will continue to weaken, exacerbating the already-dire supply shortage. A report prepared for RESCON indicates that the downturn in residential construction will last well into this year and be followed by a slow recovery in activity from 2026 to 2028. 

We would need to build 150,000 new homes annually for the next seven years to meet the target. But we’re not even close.

Building Costs Must Be Cut

Going forward, we know what needs to be done. The cost of building a new home must be reduced by cutting the tax burden on new housing, reducing red tape and adopting digitization of the approvals process.

With both a federal and Ontario election looming, now is the perfect time to hold our senior levels of government to account.

Sadly, we’ve witnessed massive hikes in new housing taxes, fees and levies. The tax burden now accounts for 36 per cent of the purchase price of an average new home in Ontario – up from 31 per cent three years ago.

The average new home now costs $1,070,000 in Ontario, so that means consumers are on the hook for $381,000 in income taxes, corporate, sales and transfer taxes, and development charges and fees. Development charges account for a big chunk of the tax burden and have risen to stratospheric levels.

In the GTA, the average municipal charge for new homes is now $164,920 – about $42,000 higher than three years ago. For apartments, the current figure is $122,387 – about $32,000 higher than in 2022.

To reduce development charges, senior levels of government must ensure municipalities have adequate funding for local infrastructure.

Refreshingly, there have been some inroads. The federal Liberals are removing the sales tax on construction of new rental apartment buildings and the Ontario government intends to follow suit. 

The federal Conservatives, who are projected to form the next federal government, have promised to cut the sales taxes on all new housing under $1 million. The Tories estimate the measure will reduce the cost of an $800,000 home by $40,000, and spur construction of 30,000 more homes per year.

Meanwhile, the cities of Burlington and Vaughan have taken action and lowered development charges. We need other municipalities to follow suit. 

Slow Approvals Add to Cost

Red tape is also adding to the cost of new housing. Bureaucratic delays add $2,672 to $5,576 per month per unit depending on the municipality. When applied to the typical delay period, it can add $43,000 to $90,000 per unit.

And, although we live in the digital age, many municipalities still have outdated and antiquated development approvals systems. The systems need to be digitized and standardized across the province.

A survey of private-sector homebuilders by StrategyCorp noted that planning processes and constantly shifting regulations are putting a damper on housing construction although there are tools available at little cost – like a universal planning application – that would streamline the process.

This can not continue. The residential construction industry is critical to the economy, employing 600,000 workers in Ontario alone and contributing $57 billion to the Ontario GDP. Nationally, the construction industry employs 1.6 million and contributes $151 billion, or 7.4 per cent to the country’s GDP.

We know we can fix this. 

We’d be wise to heed the words of Captain Jean-Luc Picard, another notable Star Trek figure, who noted, “There is a way out of every box, a solution to every puzzle; it’s just a matter of finding it.”