By Richard Lyall
RESCON
Behavioral economics teaches us that change happens when the pain of staying the same is greater than the pain of change.
I am hopeful that governments may be reaching that precipice on housing. With the residential construction industry at rock bottom, or very close to it, change is the only way to fix the sector.
I don’t think that many people realize how bad the situation has become. We have the worst level of new home and condo sales in a generation.
We are now staring into the abyss. Industry layoffs have started. Employees and trades workers are losing their jobs. Tenders are being delayed or scaled back and developments have been shelved.
Ontario housing starts plummet
Housing starts and sales have plummeted. In Ontario, for example, housing starts in the first seven months of 2025 fell about 25 per cent compared to the same period last year, CMHC reports, and the number of starts in Ontario could drop to the low-60,000 range until 2031.
At the current pace, it’s projected that Ontario could fall short by a staggering 708,000 units over the nine-year period. The decline could cost Ontario 41,000 jobs and drain more than $6 billion a year in combined tax revenue from all levels of government, according to the experts.
To say the situation is bad would be the understatement of the year. Canada Mortgage and Housing Corp. (CMHC) figures we need to build between 430,000 and 480,000 homes each year over the next decade to restore affordability to the market. However, in 2024, we saw construction started on only 245,360 units.
The federal government has set a target of building 500,000 homes a year for the next decade, and the province set a goal of building 1.5 million homes between 2023 and 2031. Fat chance of that happening.
Toronto decline most pronounced
In Toronto, which is the country’s largest real estate market, the decline has been the most pronounced. In the first quarter of this year, pre-construction condo sales were lower than in the same period in 1995, research firm Urbanation Inc. reports. Other regions were also down.
Research by Altus Group economic strategist Peter Norman indicates that if the situation continues more than 100,000 jobs in the Canadian homebuilding industry could be eliminated.
The housing market downturn is proving financially disastrous for cities such as Toronto. A decrease in multi-unit and single-detached units drove starts in July down 69 per cent compared to the same month in 2024. That amounts to more than 100,000 jobs and billions of dollars in revenue.
A staff report in July indicated there was a substantial shortfall in anticipated Municipal Land Transfer Tax revenue in Toronto during the first few months of 2025.
Excessive taxes, fees and levies
The main reasons for the decline are the excessive taxes, fees and levies on new housing, as well as red tape and the sloth-like approvals process.
In Toronto, for example, people making incomes of more than six-figures are being shut out of the market by sky-high housing costs.
A report done by CivicAction recently looked at a hypothetical 200-unit apartment which would cost nearly $130 million to build, or about $630,000 per unit. The organization found the developer would need to charge average rents of more than $3,800 to break even – between $1,700 and $2,800 per month beyond what those earning $85,000 or less can afford.
Those earning a salary of $75,000 would not be able to save enough money to purchase an average Toronto home, the report notes.
To fix the problem, governments must address the tax burden on new housing. It is crippling the market. The fees presently account for 36 per cent of the cost of buying a new home or condo.
Governments must get serious
The feds have moved to scrap the five-per-cent GST on new homes up to $1 million for first-time buyers and reduce the sales tax for first-time buyers on a sliding scale for homes purchased between $1 million and $1.5 million. In Ontario, we need the provincial government to follow suit and eliminate their eight-per-cent portion of the HST for first-time buyers.
Further, to show they are serious about the crisis, we need both levels of government to take it a step further and eliminate the sales taxes on all new homes – not just for first-time purchasers.
Development charges (DCs) also need to be cut. Between 2014 and 2024, Toronto hiked DCs for single and semi-detached homes by 464 per cent, whereas salaries in Ontario went up only 29 per cent.
The development approvals process also must be tweaked. A report by Altus Group found that Ontario municipalities take an average of 23 months to review site plan applications – far beyond the provincial mandate of 60 days.
Difficult to believe, but it takes nearly 250 days to get a construction permit in Canada, double the time it takes in the U.S. Sadly, we rank 34th out of 35 OECD countries – slower than every country except Slovakia.
The future of the residential construction industry – and our economic future – depends on the action we take today. The next several months are critical in determining how well we rise after the fall.
Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.
