Ontario developer coalition asks government to provide tax breaks for homebuyers

TORONTO — A coalition of Ontario developers has written to three levels of government asking for a reduction in taxes on new homes. The coalition says the savings will be passed on dollar for dollar to homebuyers.

The new group, the Coalition Against New-Home Taxes (CANT), is made up of 18 developers who collectively plan to build 100,000 new homes over the next 10 years.

The coalition wants the federal and provincial governments to eliminate the harmonized sales tax on all new homes, as they have done for rental housing construction. The coalition also wants the province and the City of Toronto to eliminate the land transfer tax on new homes.

The coalition also wants municipalities to reduce development costs to 2009 levels, adjusted for inflation.

“We realized something had to change and started thinking about creative ways to bring government to the table, have an honest conversation and work together to find solutions,” Matt Young, president of Republic Developments and leader of the coalition, said in an interview.

“We felt we could do that by signing a pledge that for every dollar of tax reduction, this group of developers would reduce their prices dollar for dollar to ensure that the savings go to homebuyers.”

The group includes Alterra, Harlo Capital and Stafford Developments.

In 2009, taxes accounted for about 12 percent of the cost of an average Toronto condo, the group says. Now, taxes account for about 29 percent of the same home. Development costs alone have increased 1,200 percent in the past 15 years, they say.

“Now the system has collapsed due to higher interest rates,” the coalition said in a letter sent Wednesday to the federal government, the province and the City of Toronto.

“For years, all levels of government have been raising revenues from rising housing costs. If nothing is done, high taxes on new homes will put even more pressure on the housing supply in the years ahead.”

The letter warns of job losses in the housing sector and economic problems if nothing changes.

“To solve the current affordability crisis, your governments must take decisive action to make homes cheaper to build and cheaper to buy,” the coalition said.

“We will accept whatever accountability measures the government chooses to implement to ensure the savings benefit Canadians and homebuyers,” Young said.

His company, which is building or planning to build numerous apartment complexes in Toronto, saw a marked decline in sales starting last fall.

“Housing is not viable today,” he said. “You can’t sell it low enough to get sales and still make money and if you can’t make money or you can’t meet a certain margin, banks won’t finance your projects, which means that all projects, for the most part, are pretty much stuck.”

Ottawa and Ontario have taken numerous legislative steps to jump-start construction of much-needed housing projects. A combination of rising home prices over the past decade — especially during the pandemic — and a steep rise in interest rates has put many projects on hold.

Newly released data from the Canada Mortgage and Housing Corporation shows that new home construction in Ontario fell 44 per cent in June compared to a year ago.

Material and labor costs have also increased significantly in recent years.

“There is no shortage of people wanting to buy a home, but there is a shortage of people who can afford the homes that are available,” Young said.

Municipalities across Ontario aren’t convinced by the developer group’s proposal if it means lowering development fees. The province passed a law in 2022 that lowered the development fees developers had to pay municipalities for infrastructure like roads, sewer and water.

The Association of Municipalities of Ontario estimated the changes would leave municipalities with a $10 billion gap over 10 years. The province later withdrew many of the changes, but the association says they still represent a $2 billion gap over the same period.

“The reason development costs are going up is exactly the reason developers have stated: all of these input costs are going up,” said Lindsay Jones, the association’s policy director.

“The solution cannot lie in just reducing development costs, without a new source of financing for infrastructure, because that will not allow you to build more houses.”

Despite that difference, municipalities are encouraged to sit down with developers to try to find a solution to the affordable housing crisis, Jones said.

“It’s really unique that everyone has the same problem and is committed to the same goal: affordable housing. That’s an opportunity that we can seize as a collective,” she said.

This report by The Canadian Press was first published August 1, 2024.

Liam Casey and Allison Jones, The Canadian Press