Ontario can end sales tax on all home sales without waiting for Ottawa

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When it comes to housing, Ontario Premier Doug Ford says too much and does too little.

Ford said Monday that sales tax should come off all new homes, not just those purchased by first-time buyers. Great idea, but why say it if you aren’t going to do it?

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“If we allow everyone to buy a new home, look at the economy — new fridges, new stoves, new microwaves, new televisions, new carpets, new couches, new beds, new everything,” Ford told reporters. “That’s my argument, and if we do that, then we’ll be able to move forward,” he said.

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Ford’s absolutely right. New home sales are an economic driver at the retail level and they ensure work for people in the trades. A meaningful tax incentive would do much to increase housing development and help fix Ontario’s housing shortfall.

Unfortunately, it’s not what Ford and Prime Minister Mark Carney have promised. Instead, they are offering a full sales-tax rebate only for first-time buyers, a very small segment of the new housing market.

“The first-time homebuyer exemption in Ontario will have very little effect, less than five per cent,” Ontario Home Builders’ Association CEO Scott Andison told Global News. “We need a very specific Ontario-led approach and that is to remove the provincial sales tax off the price of all new home purchases.”

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Yes, exactly, and note the use of the words “Ontario-led.” So far, Ontario has trailed, not led, on removing sales tax from new homes. The federal government announced its plan in late May. The provincial government didn’t follow until the end of October, with a plan that mirrored what the feds were doing. Neither rebate has been passed yet.

This week wasn’t the first time Ford mentioned taking sales tax off all new homes. He raised it in the summer, saying he’d push the idea with Carney. Unfortunately, Ford quickly backed off, saying, “I got my knuckles rapped a little bit from the (provincial) finance minister, doing his job. That’s a lot of money.”

No doubt. Helping all new home buyers by forgoing the sales tax would be an expensive proposition. By contrast, the new-buyer-only program will cost peanuts. Ontario’s recent fall economic statement pegs it at $35 million in 2025–26, then $190 million the year after that and $245 million in 2027–28.

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At the federal level, the first-time buyer tax break would cost $1.9 billion over six years, according to a report by the Parliamentary Budget Office, although the government claims it could save Canadians $3.9 billion over five years.

As it stands, the first-home buyer plan is just the sort of performative policy that appeals to politicians. It makes it sound like they’re doing something, but doesn’t cost too much. Yes, the combined sales-tax rebate would take 13 per cent off the cost of a home, but not for enough buyers to make a huge difference.

Ford has put himself in an awkward position. Only weeks ago, his own government was praising itself for the limited sales-tax rebate. Now Ford is criticizing that very policy. But here’s the great thing: There’s nothing to keep the Ford government from giving Ontarians a better deal by eliminating its own eight per cent sales tax from all new homes, even if Carney doesn’t follow along.

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A full sales-tax rebate would be a smart and gutsy solution to the province’s housing shortage. While moderating prices in the resale market offer buyers some relief, the price drops do nothing to fix Ontario’s housing-supply deficit.

The province’s housing starts in the first quarter of this year were the lowest of any quarter in the last 15 years. Projected home starts over the next few years are about half of what’s required to meet government’s target of 1.5-million new homes over 10 years.

It will take more than a tweak to get new home construction moving. The core problem is that it costs more to build a new house than buyers are willing or able to pay. Once builders add up land, materials, construction costs, profits, development charges and 13 per cent HST charges, new home prices are simply too costly for the market.

Sales-tax elimination is the most practical way to get prices down for new homes. One might ask why new homes face sales tax in the first place, when resale homes do not.

If you want more of something, don’t tax it. It’s a simple concept. Ford gets it, but he should either do it or stop talking about it. Hinting that a better deal could be coming just adds more uncertainty for potential home buyers.

National Post

randalldenley1@gmail.com

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