I really don’t want to talk about it.
Or think about it.
I can’t get into it. I think I’ll be sick. It makes me want to cry. It makes me want to remove the maple leaf tattoo on my back.
I just ask one thing: once the election is over, can those of you who support you-know-who just try not to do too big a victory lap?
Good lord, how did we get here…
In any event, many of us have spent the last several weeks sifting through all the campaign promises (lies?), looking at what the various parties and candidates are offering us (bribing us with?) in exchange for our votes, and every one of us has our one area of focus or issue that’s at the top of our list.
Personally, I took one of those “Who Should You Vote For” surveys, and the fact that I was even being asked some of those questions was enough to rattle me and show me where society has gone.
In any event, I’ve heard a lot about this notion of eliminating HST on new construction, and while it’s ironic that I’ve been championing this for many years and now am going to question the effectiveness of it, I think it’s a conversation that needs to be had.
Not only that, I think it might lead into a question about how otherwise to help with “affordability” if we were to determine that reducing or eliminating HST won’t have the intended (or promised?) effect, and since you’ve already read today’s blog title, you know where I’m going to take this…
So first and foremost, consider this:
Buried in the price of every new house or condo offered for sale is a ridiculous amount of HST.
We live in a world with among the highest sales tax anywhere on the planet.
13% is a lot, on a relative basis, especially considering our rates of income tax and the thousand other taxes that exist in this country, including many sneaky ones (like when you buy a TV and the government assumes you’re disposing of another TV, so you’re charged a fee for doing so), but I digress.
13% is a lot when you purchase a chocolate bar for $2.00. It’s only 26 cents, but on a relative basis, that’s a lot.
13% is a lot when you purchase a car.
And if you purchase a particular car, don’t forget, you have to pay a luxury tax, since our government wants to punish you for being successful, and the have-nots are angry that you have, but I digress…
All this is to suggest that, as crazy as it is to think about the absolute amount of tax paid on a high-dollar purchase like a car, compared to the relative amount of tax purchased on something like a chocolate bar, nothing compares to the idea of paying the relative and absolute numbers associated with a new home.
It’s insane.
I’ll save the calculations because they’re anything but straightforward, but a $1,000,000 new-build in Markham might cost you $895,000 if the government wasn’t charging HST to the developer.
I often wonder what would happen if HST was added on instead.
Imagine a sticker price of $899,000 for a new detached home in Innisfil, and then imagine 13% being added on top of that.
Would buyers revolt?
I assume this is why developers began including the HST in the price to begin with, but either way, it’s an absurd amount of money.
Call it “fair” or call it “necessary,” but don’t disagree with one simple fact:
HST applying to new homes does not help with affordability in a country that struggles with affordability.
I have written about the HST many times on Toronto Realty Blog so I’m not going to bore you with links to past articles.
What I will bore you with, however, is the following:
“The Increasing Tax Burden On New Ontario Homes”
That’s a blog post that I wrote in December of 2024 in which I outlined that a whopping 35.6% of the cost of a new home is made up of taxes, including HST, as well as many others.
I want to explore those “many others” in a moment, but first, let’s stick to HST.
Amidst all the election promises, party leaders are offering “housing affordability” by eliminating the federal portion of HST that applies to new homes, which amounts to five percent.
Two weeks ago, this article ran in the CBC:
“What Election Promises On Housing Would Mean For Toronto And The GTA”
CBC News
April 11, 2025
The section that really concerns us today is that which discusses HST.
From the article:
Both Liberal Leader Mark Carney and Conservative Leader Pierre Poilievre have promised to eliminate the five per cent federal goods and services tax off the purchase of some new homes, but the promises differ.
The Liberal proposal is limited to new homes under $1 million, for first-time home buyers only. The Conservative proposal would cover a wider range of purchases: all new homes priced under $1.3 million, regardless of the buyer.
There are questions about how far either proposal would go toward making the Toronto housing market more affordable.
GST is not charged on resale home purchases, and resale accounts for roughly three-quarters of the residential real estate market in Toronto, based on resale data from TRREB and new home sales data from Altus Group and BILD over the past decade.
Steve Pomeroy, a professor at the Canadian Housing Evidence Collaborative at McMaster University, says the GST cuts will help stimulate some new home construction, but says the Liberal and Conservative claims that the move would save new home buyers up to $50,000 or $65,000 off their purchases are not entirely accurate.
“It’s a good 10-second political sound bite,” said Pomeroy in an interview. “The reality is it’s not going to have that big an effect.”
He says that’s because developers build the sales tax into the market price of a new home.
“You negotiate with the builder for a price and let’s say you agree to $700,000, which would be a relatively modest condo in Toronto,” said Pomeroy. “You don’t actually then add the tax on top of that. It’s already absorbed in the price, because that’s the price you’ve negotiated.”
John Pasalis, president of Realosophy, a real estate brokerage in Toronto, questions the effectiveness of extending a GST cut to all purchasers of a new home.
“How do we make it more affordable for the next generation to own?” Pasalis said in an interview. “I tend to think a policy that gives a tax benefit to first-time buyers, younger families, rather than people who are using homes as an investment is a way to get down that road.”
We can’t debate the accuracy of the above facts and opinions, can we?
I might boldy suggest that the opinions offered by Mr. Pomeroy and Mr. Pasalis are facts.
For many years, I have argued that eliminating HST or one of PST and GST on new home sales woudl be a step in the right direction for housing affordability, but like Mr. Pasalis and Mr. Pomeroy, I’m not suggesting that it’s a magic wand.
As the CBC article notes above, only one quarter of all home sales are new home sales, thus the elimination of some/all of the HST wouldn’t have a sweeping effect across the country.
Not only that, and perhaps most importantly, new home construction has slowed to a crawl this year. Elimination of HST sounds fantastic, but if sales of pre-construction condos are down 90%, then what the heck are we talking about here?
I think we all want to believe – or picture, since politicans love to tell stories about “a family I ran into recently at a local church bake sale,” that the buyer of a new home is a lovely family of five who desperately wants to climb onto the property ladder, and that eliminating HST will help them do exactly that.
But in reality, we know that investors have dominated the pre-sale real estate space for the last decade.
So does eliminating HST really help make real estate more affordable for those who, apparently, “need” it most?
Mr. Pasalis suggests in the article that we focus on “the next generation,” and if we were really going to do that, then we’d need to take a step back and look at the way real estate is taxed. Yet again.
We have no shortage of real estate related taxes in this city, province and country.
Let me again refer you to a blog I wrote in 2024:
“How Can An Increase In Taxes Mean An Increase In Affordability?”
In this blog post, we discussed the following:
-Ontario Land Transfer Tax
-Toronto Land Transfer Tax
-Municipal Development Charges
-Toronto Vacancy Tax
-Underused Housing Tax
-Federal “Anti-Flipping” Tax
-Municipal Non-Resident Speculation Tax
-Ontario Non-Resident Speculation Tax
-Property Tax
-Capital Gains Tax
-HST On New Homes
That’s a lot. But we live in Canada. And there’s an election on Monday. But I digress…
My point is this:
If we really wanted to make housing more affordable for future generations and if we really wanted to give first-time buyers a leg up, we would eliminate ALL land transfer tax for those buyers.
Just consider the buyer of a $1,200,000 property in Toronto.
They would, conceivably, be making a $240,000 down payment, or 20%.
But they would also be writing a cheque to the province and the city for $40,950, minus the silly “rebate” which amounts to $8,475.
That rebate, by the way, is an absolute number, not a relative one.
So when the number was fixed many years ago, it represented greater importance ocmpared to today as prices have risen substantially since then.
Not only that, the land transfer tax upon its inception at the provincial level in 1974 was never intended to have the dastardly effect then as it does on housing now. After all, the first “bracket” in the sliding scale of taxation was from $0 – $55,000, so that has to tell you what prices were like and the negligible effect that the tax was intended to have.
We also never intended to have a municipal tax essentially DOUBLE the amount of land transfer tax that buyers have to pay, as was the case when David Miller brought the tax into effect in 2008.
We never thought (or at least I didn’t…) that the muncipal tax would be increased six or seven times, as it has been since 2008.
And last but not least, we never assumed that the City of Toronto would become so desperately reliant on the tax (often over $1 Billion in revenue per year) that increasing the rate of tax would be “necessary” to offset the decline in transactions.
All this is to say: I think first-time home buyers should be exempt from 100% of the municipal and provincial land transfer taxes.
Now, what if a young man buyers his first condo at 26-years-old and then marries and purcahses a home with his wife at 29-years-old in order to start a family?
Well, now he’s out of luck. He won’t be exempt because he’s already owned a condo, and here’s where things get murky.
But is it any less murky than the idea of eliminating 5% of the HST on new homes and how that is supposed to help with affordablity?
Connect the dots:
-New homes are primarly purcashed by investors, not end-users, not families
-New homes account for (in a good year) only one-quarter of sales
-The federal portion of the 13% HST (in Ontario) is only 5%
It doesn’t seem like the changes that the federal political candidates are promising is acutally going to do what they’re saying it is.
But we already knew that, right?
Because nothing they promise has the effect that they say it will, and I’m convinced that nothing they do will have an effect.
Mucking around with five percent on new homes isn’t the answer.
Attack land transfer tax.
Attack development fees.
And while both happen to fall under municipal and provincial jurisdictions, I refuse to accept that as a reason why the federal government can only consider HST as their “brilliant idea” to increase housing affordabilty.
Poltician after politican acts like Austin Powers and talks about building “One Billion Homes” but that’s fantasy.
If they really want to have an impact, give a financial break to first-time buyers, young buyers, families, or whoever else they want to glorify and salivate over in their campaign promise speeches.
Is there a hockey game on TV on Monday night?
I sure don’t want to watch election coverage.
Nobody enjoys watching their own home slowly burn to the ground…
