Could HST holiday become a reality in Ontario?

By Richard Lyall

for Canadian Forest Industries

March 23, 2026

For a growing number of middle-class Canadians, the dream of owning a starter home has slipped from challenging to nearly impossible.

Nowhere is this more evident than in Toronto, where the gap between incomes and new-home prices has widened into a chasm.

Newly built family-sized starter homes across 23 Canadian metropolitan areas are now more than twice as expensive relative to income as they were in 2004, according to research done by the Missing Middle Initiative.

Since then, prices at the lower end of the new-home market have risen by 265 per cent on average. Over the same period, young dual-earner incomes have grown just 76 per cent.

The result? Young families are being priced out of the very homes that once formed the backbone of middle-class wealth building.

This is not simply a Toronto story. Starter homes in markets like London, Kingston and St. Catharines-Niagara are now less affordable than two decades ago.

If prices stopped rising tomorrow, it would take the average metropolitan area 16 years to return to a 4:1 price-to-income ratio - and roughly 25 years to restore 2004 levels of affordability.

Still, Toronto stands out. A decade-by-decade affordability analysis published in The Globe & Mail shows that Toronto and Vancouver experienced the steepest deterioration between 2005 and 2015.

When the report compared the three most unaffordable cities in 2005, 2015 and 2025, they shared a defining feature: All of the cities are located in areas with stricter zoning and land-use rules, where housing supply struggles to expand in a timely way in response to the demand.

A new report from the C.D. Howe Institute, meanwhile, indicates that the way governments finance and regulate housing-enabling infrastructure is compounding the crisis. Municipalities rely heavily on upfront development charges to pay for water, sewer, roads and transit. These charges are levied early in the construction process, forcing builders to finance public infrastructure through high-cost private borrowing embedded in the price of a home.

This approach raises costs for owners and renters alike and discourages construction in high-growth regions where housing is most needed.

A working group convened by C.D. Howe found broad support for modernizing a model to expand municipal borrowing capacity and spread infrastructure costs over the full lifecycle of a home rather than front-loading them onto the first purchaser.

When homes are not built, there is a ripple effect - not just on the economy - but also on the labour force. Workers leave the industry. Prolonged slowdowns in housing starts permanently erodes skilled-trade capacity. When workers leave the sector, they do not automatically return.

The consequences are visible on the ground. Ontario’s housing market has slowed dramatically. Pre-construction sales have collapsed. Builders are shelving projects. Skilled tradespeople face layoffs. This shrinking pipeline of labour today means even tighter supply tomorrow.

One immediate, targeted policy lever could help break this cycle: a three-year HST holiday on the purchase of new homes up to $1.3 million.

The proposal is backed by RESCON and supported by new economic modelling from the Canadian Centre for Economic Analysis.

The analysis suggests that temporarily removing the HST on new housing would boost sales and preserve construction activity, while supporting approximately 26,000 direct industry jobs and generating billions in GDP.

Equally important, research in the report suggests that the policy would be revenue-neutral for governments, as increased economic activity and preserved employment offset forgone tax revenue.

The pain of doing nothing would be severe. If no action is taken, the province stands to average 21,500 fewer housing starts every year over the next decade compared to the recent 10-year average. The shortfall would account for about 390,000 fewer Ontarians being housed by 2035.

New homes in Ontario are taxed at levels comparable to alcohol and tobacco. When governments layer taxes such as HST, development charges, land transfer taxes and planning fees onto a single new unit, they are directly inflating the sticker price paid by a young family.

A temporary HST holiday would create urgency in the marketplace, incentivizing buyers to move forward and allowing stalled projects to proceed. It would send a clear signal to the market.

Development charges also need to be rolled back and restructured. Rather than requiring first buyers to shoulder the full cost of long-lived infrastructure, municipalities should be empowered to finance infrastructure over time, using tools that align costs with benefits across generations.

Planning and approvals must be digitized and standardized as well. Lengthy approval timelines add both risk and cost. As-of-right zoning for missing-middle housing - duplexes, triplexes, townhomes and small apartment buildings - must become the norm rather than the exception.

Meanwhile, governments must support off-site and innovative construction methods, expand public-private partnerships to accelerate servicing, and remove barriers that constrain flexible ownership models. If we’re serious about supply, we can’t cling to outdated processes.

Canada’s housing crisis didn’t emerge overnight. It developed over two decades of rising demand colliding with inflexible supply and a tax-and-fee regime that quietly inflated prices. The consequences are stark. In Toronto, for example, middle-class families are locked out of new construction, forced either into older housing stock or out of the city altogether.

A temporary three-year HST holiday would provide immediate relief and stabilize a faltering construction sector.