By Richard Lyall
RESCON
More than 2,500 years ago, legendary Chinese philosopher and writer Lao Tzu said, “If you do not change direction, you end up where you are heading.”
No truer words have been spoken. They still ring true, especially when it comes to issues affecting the residential construction industry.
We need to adjust the sails and chart a new course. The alarm bells have been ringing for some time now and following the same old blueprint will not get us to where we want and need to go.
Reduce costs and speed up approvals
Governments must enact policies to bring down the cost of construction, cut bureaucracy and red tape and speed up the approvals process. Taxes, fees and levies are crippling the industry. They add roughly 36 per cent to the cost of a new home, making them unaffordable for many.
A lot of the issues, such as exorbitant development charges (DCs) and regulatory hurdles, are the same issues that impacted housing years ago. They are enduring and remain unresolved. If we are to successfully deal with the crisis, they are the first issues that must be tackled.
Decisions by both the federal and provincial governments to eliminate the sales taxes on new housing up to $1 million for first-time buyers and decreasing it on a sliding scale for first-time buyers of homes purchased between $1 and $1.5 million were a good start. First-time buyers account for roughly 35 per cent of new home purchases so it will have a positive effect.
Cutting the federal and provincial sales taxes will shave 13 per cent off the cost of a new home for first-time buyers. On a $1-million new home, for example, buyers would save $130,000.
Initial reports indicate that the sales tax initiative is already working and is resulting in increased sales traffic at sales centres.
Sales tax cuts
In light of the crisis, though, the sales tax cut should be applied to all buyers of new homes. We are hopeful the federal and provincial governments will consider such action going forward.
Sales of new housing have reached historic lows. The federal government has pledged to build 500,000 units in each of the next 10 years and the Ontario government has promised 1.5 million homes between 2023 and 2031. Unfortunately, we are nowhere near those lofty goals.
In Ontario, the final tally for housing starts in 2024 was well off what’s needed to reach the target, even with various new categories being added by government such as university dorms. And housing starts for the first quarter of this year were at their lowest levels since 2009.
Urbanation reports that the new condo market in the Greater Toronto Hamilton Area is on track to record its worst year for sales in three and a half decades. New condo apartment sales in the region totaled 319 units in the third quarter of 2025, the lowest quarterly total since the third quarter of 1990.
Economic uncertainty
Municipal Affairs and Housing Minister Rob Flack recently told a housing summit hosted by RESCON that the market is essentially at a standstill, largely because of the economic uncertainty caused by events south of the border which are causing buyers to hit the pause button.
All this will take a toll on our economy, as we heard at our housing summit that there is a risk of losing almost 100,000 construction jobs in Ontario, which would translate to a $10-billion economic hit.
Fixes for the problem are obvious. We must drive down levies such as DCs and speed up the approvals system.
DCs are far too costly in most jurisdictions. Municipalities in Ontario currently have the highest DCs in the country, according to a report from the Missing Middle Initiative.
In Toronto, for instance, DCs for residential buildings were raised by 46 per cent in 2022. Presently, developers pay nearly $140,000 in municipal taxes on a single-family home. DCs for smaller units range from $60,000 for a bachelor apartment to more than $80,000 for a two-bedroom unit. Remember, these charges are passed on to homebuyers in the form of higher prices.
DC relief
The Ontario government recently passed legislation that permits developers to defer DC payments to municipalities on new homes until occupancy, which provides some relief. Prior to the change, builders were required to pay DCs when a building permit was issued by the municipality.
Slow approvals, meanwhile, are also adding to the cost of housing. Ontario fares worse than other provinces. It takes a whopping 17.5 months to get a municipal plan amendment in Ontario, 19.6 to get a zoning bylaw amendment, and 31.2 months to get a plan of subdivision approved.
In Toronto, it can take more than two years to get a project approved, making it the second worst city in Canada for approvals – just ahead of last-place Hamilton.
We are in the midst of the worst housing crisis in a generation. Unprecedented times require extraordinary solutions. Goals must be realigned to reduce reduce barriers to building and costs to homebuyers. Governments must collaborate with industry to further drive down the tax burden, modernize the fee structure applied to new housing, and streamline the approvals system.
While the present situation is bad, it could even get worse if we sit on our hands and don’t do more – fast.
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.
