Lyall: Crash Warning.
September 23, 2025
By Richard Lyle
Houston, we have a problem.
The sentence uttered by Apollo 13 commander Jim Lovell to Mission Control in Texas back in 1970 seems an apt description of the residential construction industry these days. The wheels have all but fallen off new home starts and sales – both across Canada and in Ontario.
The CMHC figures we must build between 430,000 and 480,000 homes each year over the next decade to restore affordability to the market. However, we are nowhere near those numbers. In 2023, 240,267 housing units were built in Canada and in 2024 we saw construction started on 245,360 units. In the decade between 2011 and 2021, the nation built an average of only 204,000 units a year.
The provincial government in Ontario, meanwhile, set a target of building 1.5 million homes between 2023 and 2031. However, forecasts show the province missing the goal by a wide margin, despite widening its definition of a home to include retirement home suites and student dorms. The CMHC said in its latest report that housing starts in Ontario for the first seven months of 2025 fell around 25 percent compared to the same time last year.
At the current pace, it’s projected that Ontario could fall short by a staggering 708,000 units over the nine-year period. Experts say the shortfall could cost Ontario 41,000 jobs and drain more than $6 billion a year in combined tax revenue from all levels of government. Projections from the CMHC indicate that annual housing starts in Ontario could drop to the low-60,000 range until 2031 – far below the target of around 175,000. Latest data from a tracker, meanwhile, shows 70 percent of Ontario municipalities failed to meet their housing targets in 2024 and the gap is expected to grow. The tracker was established to gauge progress as part of the $1.2-billion Building Faster Fund that rewards municipalities that reach at least 80 per cent of their annual target with funding. Bonus funding is available for municipalities that exceed their targets. Thirty-five out of 50 large municipalities in Ontario fell short of their targets in 2024. In 2023, 31 out of 50 municipalities missed their targets. Some of the notable cities that missed included Toronto, London, Barrie, Cambridge, Guelph, Hamilton, Mississauga and Ottawa. Some of the prominent municipalities that exceeded their target included, Kingston, Sudbury, Kitchener, Niagara Falls, Oakville and Sarnia.
The residential construction industry is entering a massive correction and being weighed down by massive taxes, fees and levies on new housing, as well as the slow approvals and red tape. The tax burden accounts for 36 percent of the cost of a new home today, up from 24 percent in 2012. The increase has crippled the market as the costs are ultimately passed on to the buyers. Development charges (DCs) are the worst offender. They are the most regressive taxes ever created in the history of our country. The people they hurt most are the ones who can least afford housing.
To help spur the market, the federal government has scrapped the five-percent GST on new homes up to $1 million for first-time buyers retroactive to May 27 although the purchaser won’t get the actual rebate until the fall when it goes through the legislative phase. The feds are also reducing the sales tax for first-time buyers on a sliding scale for homes purchased between $1 and $1.5 million. We would like to see the provincial government step up to the plate and reciprocate by ditching the provincial sales taxes for first-time buyers of new homes.
To further spur housing construction, we also strongly feel that both levels of government should be looking at axing the sales taxes on all new homes, not just for those buying their first one. Governments must also take aim at DCs. They have become a runaway train and need to be rolled back. Future hikes should be geared to the rate of inflation. In the City of Toronto, for example, DCs for single and semi-detached homes increased by 464 percent between 2014 and 2024, whereas incomes only went up 29 percent.
Thankfully, Ontario has brought in legislation which permits builders to defer development changes until occupancy as opposed to when a building permit is issued. This means they won’t have to finance the charges while projects are being built. However, the charges are still too high.
There will be significant economic repercussions due to the housing meltdown. In Ontario, the construction industry contributes seven to eight percent of Ontario’s GDP, with the residential sector accounting for a big chunk of that. To turn the situation around and support recovery, governments must embrace new policies that lower the tax burden and speed up approvals. The consequences of not doing so will be catastrophic.
