The National Post previously reported that at least a third of a new home’s sticker price in Ontario was comprised of taxes, but an updated report, courtesy of the Canadian Centre for Economic Analysis (CANCEA), now puts the figure at 35.6 per cent.
(It gets even better when it comes to affordable housing — but more on that later.)
The Increasing Tax Burden on New Ontario Homes: 2024, which was commissioned by the Residential Construction Council of Ontario and released by CANCEA on Tuesday, is eye-opening for reasons beyond the fact that a compendium of largely superfluous taxes and production levies has reached 35.1 per cent of the final purchase price of a new home in the city of Toronto. It’s 35.5 per cent in the outlying 905 region, and 34.5 per cent in Ottawa.
The report needed only 16 pages to elucidate how bureaucratic machinations aren’t just gouging prospective homebuyers, but homeowners, too — especially the estimated 1.2 million whose mortgages, according to the Canada Mortgage and Housing Corporation, are due for renewal in 2025.
Read closely enough, CANCEA’s report makes a strong argument that, effectively, Canadians work for the government rather the other way around.
For example, CANCEA’s report demonstrates that 70 per cent of aforesaid taxes on new homes “consist of direct fees on the home, such as DC (development charges) and other fees.”
“For homes priced at $450,000,” which aligns with median income, ”… the tax burden rises sharply to 45.2 per cent,” says the report, which also notes that economics often force developers to build smaller units that are insufficient for families.
Development charges in the Greater Toronto Area have risen by a compounding 20 per cent since 2021, when CANCEA last studied the impact of taxes on home prices. The 2024 report notes that the three levels of government combined reap nearly four times more than builders for each new home that’s constructed.
And herein lies the rub. In 2019, Parliament passed the National Housing Strategy Act, which recognized housing as a human right, but, as anybody who’s walked through a park lately can attest, it’s mere window dressing.
It’s not hard to see that Canada’s banking, grocery and telecommunications sectors are but several oligopolies thriving unencumbered. That isn’t all, according to CANCEA’s president, who asserts apparatchiks bear much responsibility for the housing shortage in the country.
“I include government bureaucracy as an oligopoly in this country,” Paul Smetanin told the Post on Monday. “When you weight the number of people who work in government by their wage, they’re in the top one-third of this country.”
Unsurprising, then, that Canadians have become increasingly financially stressed while employment and remuneration in the country’s civil service have billowed, concurrently and unabated.
You would think that would turn a lot of heads. Luke Johnston, executive vice-president of development and general counsel of Dunpar Homes, has certainly noticed. He says those bureaucrats, either unwittingly or intentionally, have slowed the construction process — even for new rental housing, which the City of Toronto publicly purports is a priority.
“We faced myriad obstructions along the way,” Johnston said of a purpose-built rental tower Dunpar is building in South Etobicoke. “(The city) fought us at the Official Plan Amendment and rezoning stages; we had to take that to a contested hearing.”
The tribunal ruled in Dunpar’s favour, but that didn’t stop municipal officials from appealing, albeit in vain.
Johnston says the process has also been bogged down by the rising number of reports that planning departments around the GTA — Toronto, Mississauga, Caledon and Vaughan being the worst — have asked for over the past decade, which coincided with a regional population boom that inflamed the existing housing crisis.
“Over the last 10 years, the list of application requirements has increased exponentially, and so has the number of bureaucrats looking at your application,” Johnston said. “And there’s often a pattern of staff waiting till the last day — say on Day 29 of 30 — they write back with a comment (pertaining to) something minor, which triggers another cycle. Imagine three or four such review cycles.”
Southern Ontario’s residential construction industry maintains developers reap, on average, between eight and 15 per cent profit off of each project. Frankly, there’s no easy way to verify that claim, but CANCEA’s Smetanin is willing to vouch for it.
Nevertheless, CANCEA’s report is ultimately about more than the deleterious impact that big government has on housing. Read between the lines and you’ll realize Canada promotes a top-down culture of indolence and lassitude.
“Look at the current federal government’s increase of using outside consultants,” which reached a record $21.6 billion in 2023-24, Smetanin said.
“I go to meetings with 60 people in the room, but only three or four of us are from the industry and actually understand how things get built.”
This is where the humbling wisdom of the Peter Principle would normally kick in. But when you’re playing with house money, it’s somebody else’s problem.
“Then you get people in the room who are supposed to be policy and planning people, but they don’t fundamentally understand market economics,” Smetanin continued, “so they throw a whole bunch of money at it.”
Special to National Post
Neil Sharma is a Toronto-based journalist who covers the economy, housing market and federal politics.