Minister of Municipal Affairs and Housing Paul Calandra is expected to introduce the latest iteration of the Progressive Conservative government’s housing-supply plan in the coming weeks, but the provincial budget is a natural place for the government to include some housing-related measures, particularly ones related to changes in tax rules. Sure enough, the budget plan introduced by Finance Minister Peter Bethlenfalvy on Tuesday afternoon includes a number of taxing and spending measures intended to both increase the supply of housing in Ontario and modestly curb demand.
Asked when the housing crisis would rise to the level of a major economy-wide concern for the government, Bethlenfalvy told reporters on Tuesday afternoon that “it’s there right now.”
“Housing has been our top priority for years. We’re tackling it from the supply side because I don’t think the demand is going to relent,” Bethlenfalvy added. “People are still going to want to come to this great province, this great country. Our population is going to continue to grow.”
The biggest single policy change on the housing file had already been announced: the nearly $2 billion in new money for “housing enabling” infrastructure projects — the roads, sewers, and water pipes needed before a home in Ontario can be certified as fit for human occupation. That includes $1 billion for a Municipal Housing Infrastructure Program and a separate $825 million for a Housing-Enabling Water Systems Fund. Municipalities will be able to apply for grants under both programs to help fund the kind of projects that can otherwise hold back approvals of new housing development.
The government is also looking to add a new incentive for purpose-built rental housing, having already removed the provincial share of the HST from new rental construction. The government is proposing to allow municipalities to create a new lower property-tax class for purpose-built rentals. Some municipalities (such as Toronto) have for many years had a special property-tax class for new rental projects; it levies the same tax on new rentals as is paid by condos and single-family homes. (Otherwise, rental homes are charged a much higher tax rate.) Ontario is proposing to let municipalities offer an even more generous tax class, with new purpose-built rental projects paying as much as 35 per cent less than the rates paid by single-family homes.
The government is also proposing to give the powers currently used by Toronto, Ottawa, and Hamilton to tax vacant homes to the remaining 441 municipalities provincewide, saying that “an unoccupied home is unacceptable in a housing crisis.” Municipalities will be provided with best practices and a provincial policy framework but will not be required to implement a vacant-homes tax. Notably, the government says that it will also allow municipalities to levy a higher tax on vacant homes that are owned by non-residents.
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Speaking of foreign ownership, the government is also “enhancing” the existing non-resident speculation tax (NRST) that was first introduced under the Liberals and then increased to 25 per cent and made provincewide in 2022 under Premier Doug Ford. Officials speaking on background say that the rate of the tax will not change but that certain rules will be clarified to ensure that the entirety of a property transaction will be captured by the NRST. The government cited an example of a seller trying to evade the full brunt of the NRST and minimize their tax liability by selling a condo unit separately from the parking space and locker attached to it; the changes to the tax rules will attempt to catch such cases.
The bad news is that, despite the measures announced Tuesday, the government is not projecting that housing will become more affordable. Housing starts, which fell to 89,300 last year, are expected to fall further to 87,900 this year, before rebounding to 95,800 by 2027 — still well short of the rate needed to reach the government’s target of 1.5 million new homes by 2030. Unsurprisingly, then, the government doesn’t project that the actual resale price of a home will drop between now and then: the provincewide average is expected to approach $1 million by 2027.
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