Article content

Conservative Leader Pierre Poilievre’s pledge to eliminate the GST on residential sales if his government wins the next election would be an excellent first step toward making housing affordable again.

Or at least a little more affordable.

When the GST was introduced on January 1, 1991 by the Progressive Conservative government of Brian Mulroney, it came with a full rebate on homes up to $350,000 and a sliding scale for homes up to $450 000 $. The 5 percent tax was supposed to be adjusted for inflation every two years, but that obviously never happened.

Article content

In 1991, the vast majority of housing was priced no more than $450,000, and the GST was not intended to harm housing affordability in the way it did.

Under the current Conservative plan, the 5 per cent rebate would be eliminated for homes under $1 million, saving homeowners up to $50,000 on the purchase of a home. On an $800,000 home, a buyer would save $40,000 and about $2,200 in annual mortgage payments.

Poilievre’s “get rid of taxes” initiative should please voters because it is only beginning to understand how Canadians are relentlessly taxed. Nine years of Liberal rule have brought an unprecedented cost-of-living crisis that has eviscerated a rapidly disappearing middle class, unaffordable homeownership, high rents, expensive food and mounting debt.

In addition, approximately one third of the price of a home in Ontario is a mix of taxes, many of which are passed on by developers to consumers, and Poilievre identified the GST as an unnecessary and punitive cost for low-paid home buyers.

Inflation is another, albeit subtle, tax in which more expensive goods earn the government higher tax revenue.

Article content

Article content

But it seems that the situation is ready for the liberals.

While it would be tempting to blame the Trudeau government for the decades-long GST liability, given that house prices have more than doubled across Canada during the Liberals’ nine years of governing the country, the truth is that successive governments have neither indexed this amount to inflation, as it should have been, nor scrapped it.

The frog has been boiling for 33 years, but that could change with a Conservative victory in the next election, which could arrive earlier than expected.

But even if the Trudeau Liberals can be given a pass for their inaction on the GST, they have created an immigration quagmire that has completely devastated home-buying prospects, especially for younger people.

The government’s immigration policy, which is a mess, is undoubtedly the main culprit, according to Scotiabank — and that was before the federal government increased immigration to record numbers over the past three years. Worse still, the country is welcoming more and more workers with non-resident permits and international students, many of whom never leave. High rental prices are an obvious consequence of this, making it extremely difficult for Canadians in markets like Toronto and Vancouver to put money aside for those six-figure down payments.

Article content

The average rent in Canada has fallen from about $970 when Trudeau was elected prime minister to about $2,200 nine years into his administration’s shaky tutelage. And with about 1,400 homeless encampments across Ontario and, according to Food Banks Canada, a full quarter of Canadians living in poverty, who’s surprised?

Everything came to a head in 2023, when everyone was seemingly priced out of the real estate market in one fell swoop.

Poilievre said it takes 60 per cent of a family’s income to afford the average home in Canada, up from 39 per cent during the halcyon days of housing affordability. He also pointed out that housing costs have increased 40 times faster than incomes in Canada, with Vancouver being the third most expensive city in the world and Toronto the tenth, when comparing median income and median house prices .

“Eliminating the GST on new home construction will spur the construction of 30,000 more homes each year, which will incidentally generate more tax revenue for the government without increasing rates,” Poilievre told reporters Monday.

Article content

He also vaguely claimed that building new homes would generate $2.1 billion in offsetting tax revenue for the government.

Poilievre’s claim that removing the GST would catalyze the construction of 30,000 new homes each year across the country is not easily corroborated, perhaps suggesting that a number of models could have been imagined to achieve these numbers – as is generally the case in Ottawa.

Other barriers to housing development should also be reformed to ensure that tax cuts do not stimulate demand without increasing supply. But obstacles — like those related to zoning, permits and land use rules, for example — can only be overcome at the municipal and provincial levels.

Regardless, this in no way diminishes the integrity – and, frankly, the necessity, for a large portion of Canadians – of the Conservatives’ commitment. Reducing 5% on a home purchase may be negligible in Toronto and Vancouver, but it will make a difference if you live around Lethbridge or the Laurentians, Shawinigan or Brandon.

For what? Because younger home buyers in Canada are particularly reliant on mortgage insurance, making monthly payments even more burdensome, but that doesn’t have to be the case if the money saved on GST is used to shore up a down payment. of funds.

Article content

Who knows, maybe putting money back into the pockets of young Canadians could encourage them to start having children again.

The Conservatives also intend to free up billions by canceling the Housing Acceleration Fund and the Housing Infrastructure Fund, which the Conservative leader has lambasted for returning money directly to the government, further burdening the bureaucracy.

But while eliminating the GST is a step in the right direction, much more will need to be done to restore housing affordability in Canada. There is no doubt that Canadians need tax relief, especially on housing.

And if Poilievre is elected Canada’s 24th prime minister, the way to do that will be to put the country’s parasitic bureaucracy in his crosshairs.

Neil Sharma is a Toronto-based journalist who covers the economy, the real estate market and federal politics.

Article content