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As the Greater Toronto Area (GTA) grapples with housing affordability and supply issues, it is crucial to understand the factors influencing housing costs, and where actionable solutions can make a real impact. When constructing new homes, labor and material costs are market-based, leaving limited avenues for cost reduction. However, governments can have an impact in three key areas:
First, land costs and supply are major drivers of cost, accounting as much as a quarter of a new home’s cost, depending on housing type and location. Reluctance to expand municipal boundaries restricts new (generally lower cost) land for development and a finite supply of land within urban boundaries keeps costs elevated.
Secondly, government fees, taxes, and charges contribute significantly to housing costs, comprising approximately 25 per cent of an average new home’s cost in the GTA. Municipal fees, particularly development charges (DCs), have increased by 250 to 900 per cent over the past two decades – far in excess of property tax increases. Federally, HST rebate levels still have yet to be indexed since the GST was introduced on new homes over 30 years ago – despite commitments to do so when the tax was introduced. Addressing these fees and charges can reduce housing costs and are entirely within the power of governments to do so.
These cost levers are all within the purview of governments. Working with our industry, a coordinated collaborative effort is required from all levels of government to alleviate the housing affordability challenges in the region.
Dave Wilkes is President and CEO of the Building Industry and Land Development Association (BILD), the voice of the home building, land development and professional renovation industry in the GTA. For the latest industry news and new home data, visitwww.bildgta.ca.