The federal government's GST/HST legislation must meet the needs of the GTA housing market

A few weeks ago, the federal government tabled its proposed GST/HST reduction measures on new homes. Unfortunately, like many federal housing policies, the proposal to exempt first-time new home buyers from the GST for homes under $1 million and provide a declining exemption to homes for $1.5 million does not recognize the realities of the Greater Toronto Area (GTA) and will have little impact on housing supply and affordability in this region.
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The fact that the government is proposing even this limited measure is a tacit acknowledgement that the tax, along with the other myriad of government fees and taxes heaped onto new homes, is now one of the barriers to affordability. This is compounded by the failure to keep structural mechanisms, such as the GST/HST new housing rebate program current to market property values. That said, the current federal proposal is lacking in many ways.
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First, is the comparatively small number of new home buyers who are first-time buyers in the GTA. While the number may be higher in other jurisdictions, in the GTA, estimates of first-time buyers as buyers of new homes are between five and 10 per cent. Recognizing that resale homes do not attach GST/HST means that the total number of people who would benefit in the GTA ranges between 1,500 and 3,000 in an average year, and a paltry 500 to 1,000 people based on 2024 annual sales. In a metropolitan area that represents 20 per cent of the Canadian population — and is one of the fastest growing regions in North American — this is a symbolic drop in the bucket.
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Second, the dollar figures used are geographically biased. While $1 million will buy a very well-heeled detached single-family home in almost every other part of Canada, except the GTA and the lower mainland of B.C., the average price for a new condominium in the GTA in April was $1,019,120 and $1,530,126 for a single-family home (including townhomes, semis and detached). So, while a purchaser in Ottawa can buy a fully detached single-family home in the mid-$800,000s and pay no GST, a comparable product in the GTA would cost in excess of $1.5 million and attract nearly $70,000 in GST. And before you say, 'but salaries in the GTA are higher,' the average annual household income in Ottawa is $125,700 and in the GTHA it is $129,000. By selecting dollar thresholds that are not reflective of high-property value jurisdictions, the federal government is basically ignoring the regions where the need is the greatest.
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Last, when the GST was introduced, it had a corresponding rebate program that applied to 95 per cent of purchasers so that it would 'not pose a barrier to the affordability of new housing in Canada (page 21).' Now, with properly values effectively excluding anyone in the GTA from a GST rebate, and such a narrow federal proposal, effectively 90 to 95 per cent of homes are subject to the GST and receive zero rebate. This means less incentive to move up in new housing as families grow and expand, or down in new housing as seniors age and look to downsize, limiting mobility within existing housing stock and impeding the addition of appropriately sized new supply.

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