Big changes needed now, say new home builders
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Builders of low-rise homes come together in asking government to reduce HST on housing
The HST and the homebuilding process in Houston, Tex. were two key discussion points at the recent PMA CIBC Summit Series, an online event in which a group of low-rise builders delved into the current state of Canada’s housing market.
Moderated by Christopher Markovic, the CEO of PMA Brethour Realty Group and Andrew Brethour, the firm’s executive chairman, they were joined by Lee Koutsaris, vice president of sales and marketing in Canada for Empire Communities, Brad Carr, the CEO of Mattamy Homes Canada, Fred Losani, the CEO of Losani Homes and Shawn Keeper, president and CEO of Dunsire Developments.
A sore point among them all was the Harmonized Sales Tax (HST), first launched in 1989 by the Mulroney government as the General Sales Tax.
Brethour noted that “there was a clause within the structure that said this tax shall not cause an inordinate impact on the price of housing and that (it) will be modified and reviewed every two years. It has not changed since.”
It is, he said, time for change and he asked Carr if a portion of HST revenues being given back to a municipality to help fund infrastructure capital projects is a viable option.
Carr replied by saying that having felt for some time that “we (the homebuilding industry) are like a noisy gong when it comes to trying to convince government to reduce the HST on housing,
I’ve begun to really lean in around an idea of trying to encourage a new deal around the HST — and a deal that would hopefully create more certainty for the municipalities in the markets where housing is needed the most.”
His suggested formula would be as follows: the federal government returning a portion of tax funds collected from new housing to a municipality, which would then create what he described as a “virtuous circle,” whereby the more houses that are built, the more dollars are earned for infrastructure initiatives.
“We all know that one of the things that government can do for housing, and certainly for supply, is to invest in infrastructure that supports housing. The problem is, everybody has their hand out, and no one seems to have any money. But when I talk to government (representatives), particularly federal government, I do not think anyone expected house prices to go up 40 per cent since 2020, I do not think anyone budgeted for the amount of HST dollars that were actually collected.
The truth is, Carr added that “we need the dollars to go where the housing is needed the most, and we need them to go proportionate to the cost of growing those areas. If you think about it from a political perspective, you would say, O.K., well, someone in a small town is going to say that is unfair, I say ‘the answer is no, it’s actually absolutely fair.’
As for Houston, Brethour, who recently conducted a property assessment for a client in the sprawling municipality, said compared to the GTA, there are stark differences when it comes to housing development.
“By comparison, Houston has exactly the same GDP, produces the same amount of goods and services as the GTA, has the same population base of about six million. In terms of its housing production, Houston’s producing 60,000-70,000 units a year. Last year we barely made 20,000. This year will be less than 20,000 and 40,000 has been our top notch level
Brethour went on to say that the average price of a home in Houston is $400,000, while in the GTA it is $1.1 million.
“The market is such that if you walk in the door, you will get approval within 18 months, and you will have a shovel in the ground. And in the GTA, according to a BILD study, it is 10 years — 10 years versus 18 months. Therein lies one of the key problems of our marketplace.”
Panel members were also asked to describe the current market in one or two words. “My two words would be that I’m cautiously optimistic,” said Koutsaris. “We have seen sales slow down and a part of that has been due to interest rates. And if the forecasts are correct, and we start to see a rate decrease in June or sometime this summer, then I am cautiously optimistic that buyers will start to see that today is a good time to buy a home.”
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