Homes & Land of Ottawa

Housing Affordability & Choice for Canadians

Several weeks ago, Housing Associations across Canada sent letters to their local MPs and election candidates raising key industry issues. Housing is a tremendously important sector of the Canadian economy as a reliable generator of jobs, investment and economic prosperity. It is a bulwark in times of uncertainty, to which governments have turned time and again.

The federal government's vital role in housing policy role has been consistently confirmed. Clearly, without a firm hand and a range of effective housing measures to apply, the recent economic recession in Canada could have been much worse, not only for existing home owners and new home buyers, but for the economy as a whole. At the same time, there remain grave dangers that the relative strength of housing during the Great Recession will be misread by government officials. For well over a year, Canada's recovery has depended almost entirely on extremely low interest rates. Homes are not more affordable, they are just cheaper to finance. The actual cost of delivering a new home has not come down, it is quite the opposite. And governments -- including the federal government, have been treating new homes as ATM machines, adding measurably to those rising costs.

Making a successful transition from a fragile recovery to durable prosperity is going to require federal government policies and actions just as effective as those that facilitated the housing industry contribution toward economic recovery over the past eighteen months.

Within this framework there are three specific proposals for federal action that require urgent attention:

• Adopt a single threshold/full rebate aproach for the GST Housing Rebate across Canada, and commit to review and adjust this threshold over time in relation to new housing prices.
• Introduce a permanent 2.5% GST Home Renovation Tax Rebate available to all homeowners.
• Vigorously tackle the underground cash economy, both raising government revenues and protecting consumers.

A new home that sold for $350,000 in 1991 now sells for $550,000 and the buyer must pay the higher proportionate amount of GST. This has resulted in windfall profits for the federal government but dramatically reduced affordability for the new home buying public.

The recently introduced HST in Ontario loads yet another layer of tax onto the shoulders of new home buyers. This tax begins on new homes priced at $400,000 and escalates from there.

Depending on where in Ottawa one decides to buy a new home the fees, charges and taxes levied by all three levels of government now represent between 20% and 25% of the total cost of a new home. And just to add insult to injury many elected officials often feign concern over housing affordability whenever the issue arises.

We believe that a new permanent 2.5% GST Home Renovation Tax Rebate should be made available to all homeowners. Prior to the GST, the 9% Federal tax (FST) applied only to the materials portion of the home renovation expenditures. Then, it represented approximately 2.5% of the delivered cost of a contracted home renovation. The current GST taxes the same project at 5% -- twice the previous amount. This is unfair. Introduction of the GST also resulted in the rapid growth of underground cash transactions in home renovations.

Growth in the underground cash economy has been further exacerbated by the introduction of the HST and a new program is required immediately to protect consumers and raise government revenues. The current Contract Payments Reporting System (CPRS) employed by the Canada Revenue Agency has not directed federal tax enforcement resources to those areas where cash transactions are prevalent. It has failed to level the playing field for legitimate contractors who file their tax returns and play by the rules, as promised by the federal government. It is ineffective in addressing the underground cash economy and a source of significant cost to the industry. It is an extraordinary and unacceptable fact that home owners who employ tax-paying contractors are being punished by a tax regime that encourages underground cash deals

Courtesy of the Greater Ottawa Home Builder's Association