Could Cutting Taxes and Development Charges Make Canadian Homes More Affordable?
Conservative Leader Pierre Poilievre recently joined mortgage broker Ron Butler on the Angry Mortgage Podcast for a wide-ranging conversation about housing affordability and homeownership in Canada.
Their central argument was straightforward: taxes, development charges, permitting delays and other government-imposed costs make homes more expensive to build. Reduce those costs, they argued, and builders could produce more homes at prices Canadians can afford.
It is an appealing idea. Unfortunately, Canadian housing has never met a simple solution it couldn’t complicate.
The housing proposals being discussed
During the interview, Poilievre proposed removing GST and HST from newly built homes priced below $1.3 million – something already being done by the federal government. He also called for faster permits, more land for construction and lower municipal development charges.
He suggested tying federal infrastructure funding to reductions in municipal development charges. He also proposed a capital-gains tax holiday when proceeds are reinvested in housing construction.
These are political proposals, not current mortgage rules or programs. Whether they are eventually introduced, passed or implemented—and what the final details might look like—remains uncertain.
Still, they raise a useful question: how much of a new home’s price comes from something other than the house itself?
Buyers ultimately pay many construction costs
Before a builder can sell a home, it must purchase land, obtain approvals, install services, pay development charges, buy materials, hire workers, finance the project and account for taxes.
Municipal development charges help pay for infrastructure needed by growing communities, including roads, water systems and other public services. These costs serve a purpose, but they also become part of the project’s budget. That expense is generally reflected in the price buyers pay.
Long approval timelines can add costs too. A builder may carry the land and financing for years before construction begins. Delays can also reduce the number of homes reaching the market.
Reducing those expenses could make some projects more financially viable and encourage additional construction. More supply would be welcome, particularly in communities where population growth continues to outpace new housing.
Would buyers receive all the savings?
If taxes or development charges fall by $30,000, it does not automatically mean the selling price drops by $30,000. Builders generally price homes according to market conditions, competition, demand and what buyers can afford.
In a slower market with plenty of available homes, builders may pass along more of the savings to attract buyers. In a market with limited supply and intense demand, some of the benefit may remain with the developer or landowner.
That does not make cost reductions pointless. Lower costs can encourage more construction and increase competition over time. We should simply be cautious about promising that every dollar removed from a project will immediately appear in a buyer’s pocket.
Lower prices would not solve mortgage qualification
Even if construction costs come down, many buyers would still face another obstacle: qualifying for the mortgage.
Lenders look at income, existing debts, credit, the down payment and the qualifying interest rate. A household may be able to manage a mortgage payment but still fall outside the required debt-service ratios.
A modest price reduction could make the difference for some buyers. For others, particularly in expensive markets, the gap between their purchasing power and local home prices may remain substantial.
Housing affordability therefore needs more than one lever. Canada needs enough homes, reasonable construction costs, appropriate infrastructure and a mortgage system that protects borrowers without unnecessarily shutting qualified buyers out.
Rental housing and ownership housing are both needed
The interview also criticized the federal government’s emphasis on rental construction. I understand why this resonates with people who want to own a home and feel that goal is drifting farther away.
However, rental and ownership housing should not be treated as opponents. Canada needs both. More rental supply can reduce competition for existing units and give households a stable place to live while they prepare to buy. At the same time, a healthy housing system should offer realistic paths into ownership for people who want one.
The important question is whether Canada is creating enough of each type of housing in the communities where people need it.
Buyers have to work with today’s market
The debate over taxes, government programs and development charges will continue. Any policy that produces more homes at a lower cost deserves serious examination, but buyers cannot build a plan around a proposal that may or may not become law.
What you can do is learn what you qualify for today, examine the programs currently available and compare new construction with resale homes. Sometimes the numbers are closer than expected. Sometimes they reveal that another year of saving or debt reduction would create a much stronger position.
I’m Josh Tagg, an Alberta mortgage broker with Mortgages for Less. If you are thinking about buying your first home, I can help you understand your current options and develop a realistic plan—without requiring you to predict what politicians will do next. Contact me to get started.
