Doubling Housing Starts Without Breaking the Bank

Strategic Insights -

Increasing the supply of affordable housing in Canada requires innovative solutions, and through the Housing Accelerator Fund, the federal government has shown its commitment to making federal land available for homebuilding. However, further action is needed to ensure that existing land is used efficiently and that costs associated with construction, including the cost of land, are reduced. By implementing policies that legalize density, such as allowing for the construction of multiplexes, and addressing the burden of government taxes, charges, and fees, the government can help restore affordability across Canada.

Key Takeaways:

  • The only path to increasing the housing supply and lowering prices is to reduce costs associated with construction, including the cost of land.
  • The government can make federal land available for homebuilding, but existing land should be used as efficiently as possible.
  • The Housing Accelerator Fund has signed agreements with municipalities to implement policies that legalize density, such as allowing for the construction of multiplexes.
  • Future infrastructure and housing deals must go further to allow for as-of-right construction, and the federal government should enforce the deals it has signed.
  • Cities across Europe have been able to densify by building family-friendly small- and mid-rise apartment buildings, but European-style homes are not permitted in Canada due to building-code rules on staircases and elevator regulations.
  • Government taxes, charges, and fees comprise the largest expenditure in housing construction, often accounting for more than 30 per cent of the cost to build a home.
  • The federal government could reform the GST New Housing Rebate, which hasn't been adjusted for inflation since 1991, and has almost no homes in Ontario eligible for it.
  • Reducing development charges and "junk fees" associated with them could also help lower the cost of homebuilding.
  • The federal government could eliminate these fees by working with provinces and municipalities to create a transparent billing model for development charges in which they are assessed directly to the buyer and exempted from GST and other taxes.
  • The reintroduction of the MURB (multi-unit residential buildings) tax provision will help steer smaller-scale investors toward building new rental complexes instead of buying existing homes.

Statistics:

  • 30 per cent of the cost to build a home is comprised of government taxes, charges, and fees.
  • The GST New Housing Rebate hasn't been adjusted for inflation since 1991 and has almost no homes in Ontario eligible for it.
  • Development charges are the largest government-related fee for most housing construction in the GTA, often accounting for 10 per cent to 20 per cent of the construction cost.
  • The "junk fees" associated with development charges can add tens of thousands of dollars to the final cost of a home.

Sources:

  • "The Hamilton Spectator"
  • Mike Moffatt, "the Missing Middle" Podcast
  • Missing Middle Initiative
  • Government of Canada, Housing Accelerator Fund