Op-ed: To build a better housing market, stop taxing housing like cigarettes

How can we possibly achieve that? We need a full-court press to drive down the cost of new housing to make more projects viable, alongside a taxation policy that catalyzes—the prime minister’s favourite word, rather than discourages, global capital to finance the housing we need. 

Don’t get me wrong, the type of housing that gets built matters, and there will always be a need for the government and the non-profit sector to help those in the greatest need to access housing. REITs are contributing by selling existing affordable buildings to non-profits to lock in long-term affordability, through programs like the Canada Rental Protection Fund. But most Canadians aspire to either own their own home or rent a home on their own in the private housing market, where the vast majority of housing is created. Currently, that is unaffordable for many, especially young people, and that, as the PM has acknowledged, holds people back from opportunity, both economic and social.

The first thing governments need to do, collectively, is address the fact that housing is taxed at double the rate of the rest of the economy. Sin-taxing housing drives down the rate of home-building, just as cigarette taxes have driven down smoking rates.

When a new home is built, the full impact of government taxes and fees can now total a third of the overall cost, more than the cost of land or more than 50 per cent of the hard costs of construction! Even just streamlining the way these taxes are administered could save tens of thousands of dollars, without governments losing a penny of revenue.

These added costs have hit a wall, with the cost of new construction—including fees—butting up against Canadians’ ability to pay a rent that would cover the costs. This is driving down housing starts at a time when the government and Canadians— need them to double.

The government’s intention to halve development charges for multi-family housing by supporting municipalities on hard infrastructure like water, sewer and electrical costs is welcome, but will mean nothing if the provinces allow municipalities to keep adding more charges for soft infrastructure that should instead be funded through general revenues. 

While the minister is passionate about building the affordable housing needed by those in most acute housing need, he must also build a better housing market for the 96 per cent of Canadians who just want to find a place that they can afford and be proud to call home.

Canada’s new housing minister has an opportunity to challenge the provinces to get tough on housing taxes, and make lowering them a condition for federal funding of local infrastructure.

My business, Canadian Apartment Properties REIT, alongside Canada’s four other largest publicly-traded apartment REITs (Boardwalk REIT, InterRent REIT, Killam Apartment REIT and Minto Apartment REIT), which collectively comprise less than three per cent of the rental market, formed Canadian rental housing providers for affordable housing and have advocated since 2022 for policies to drive rental housing abundance and affordability.

The Canadian rental housing market of five million homes is large, diverse and highly competitive. The government should leverage this professional capacity to grow the housing supply, and reduce taxes on housing in half-in-line with the rest of the economy, or lower still, to drive more capital to provide more housing to more Canadians. Only the private market can provide the capital required for Canada to meet its housing goals. Shouldn’t the government’s priority be to ensure housing providers representing 96 per cent of the sector secure the capital to reach that goal?

Canada’s professional housing providers can and will deliver more housing at affordable prices, but to do so we need to stop taxing homes like cigarettes, and start lowering housing costs for all Canadians.