The current tax regime essentially penalizes both developers and consumers, exec argues
Lower taxes on builders will allow them to build at the pace required by current and future levels of demand, according to Brad Cartier, founder and CEO of Ottawa-based construction company Blair Capital.
The current tax regime, while well-intentioned, essentially penalizes both developers and consumers.
On top of mounting costs, developers have to contend with tens of thousands in additional levies for every project, “not to mention the employment taxes paid by our employees and sub-contractors, a cost that is of course passed on to us — just as we pass on our costs.
“The uncomfortable truth is that it’s owners and renters who ultimately pay the tax burden on the houses they purchase,” Cartier argued.
Citing data from the Canadian Center for Economic Analysis (CANCEA). Cartier said that governments make up to three times as much as developers do on every project.
“The tax burden on new housing in Ontario averages fully 31% of the purchase price, which is twice the burden in the rest of the economy,” he said. “All the taxes on income, production, sales, and transfers clearly add up. And the federal government is the largest beneficiary, with a 39% share of total tax revenues. Provinces get 37%, municipalities 24%.”
Canadian Home Builders' Association warns of slower home starts due to rising construction costs from recent rate hikes. Chief Executive Kevin Lee calls for government action to offset the impact.https://t.co/UhRksMGfRd#mortgagenews #mortgageindustry #ratehike #interestrates
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 24, 2023
Cartier said that there have been some positive steps, particularly on the federal level.
“Bill 23 has reduced some red tape and decreased fees,” Cartier said. “Removing the GST on rental housing construction now saves developers 5% — though that’s still a far cry from the 30% governments make. And Canada Mortgage and Housing Corporation [CMHC] is pushing further incentive programs to help extend loan-to-value ratios and amortizations and reduce rates.”
At the same time, Canada needs a more “fundamental shift” in how governments currently treat housing.
“As things stand now, housing is a profit centre for governments,” Cartier said. “You can’t say you desperately want more of something when you earn a three-times greater multiple from it than any other stakeholder.
“Governments need to take one for Team Canada, stop looking for tax handouts and get more shovels in the ground. That capital isn’t theirs; it belongs to the people who need an affordable roof over their heads.”
