Background
Economic growth is fundamental to a nation’s long-term success and its citizens’ well-being. Not only does it come with key benefits such as job creation, reduced unemployment, and rising income levels but growth enables governments to fund essential public services like education, healthcare, and infrastructure. However, a robust, affordably-housed labour force and an environment which supports investment in productivity and housing is required for long-term economic success. The reliance on the use of development charges and other fees to municipalities fund infrastructure and other growth-related investments has significant negative consequences on the affordability of housing and the ability of builders to invest in new developments.
Results
The total tax and fee burden in Ontario averages almost 36% of the final purchase price of a new home. This is a 16% increase since 2021 (where the average rate was 31%) and reflects the recent and significant increases in development charges that continue to drive housing costs higher. This escalation presents substantial challenges for housing affordability, market stability, and economic sustainability across Ontario.
- For builders attempting to deliverable more affordable housing, the tax and fee burden begins to approach 45% of the purchase price.
- The total development charges, fees and sales and transfer taxes that are added by the time the new home is sold is over 3 times the Ontario median household after-tax income.
- Since 70% of the tax and fee burden is essentially fixed, a decline in new home market prices squeezes developers’ profit margins, eliminating the incentive to build new homes until housing prices rise again.
- Governments are the largest beneficiary from the building of a new home in Ontario at 35.6% of final cost of purchase, making almost 4 times more than a builder of a new home.
- The construction of new homes in Ontario is effectively subject to more than twice the tax burden compared to the rest of the economy.
The research findings indicate a critical need for increased federal and provincial government involvement in funding public infrastructure investment at local levels to support growth and ease the housing unaffordability problem in Ontario
Read the Full Report: Increasing Tax Burden on New Ontario Homes
