Home builders look to tax breaks, easing of mortgage rules to stimulate recovery
The home construction industry has compiled a list of 20 recommendations — from tweaking the mortgage stress test to tax breaks for builders and billions of infrastructure stimulus spending — that it says will help builders and consumers boost the economic recovery post-lockdown.
If governments don’t invest in the construction industry, they are risking an erosion of consumer confidence that could lead to a potential credit crisis and extended job losses, warns a 36-page presentation by three home industry associations to the Ontario Jobs and Recovery Committee, chaired by Finance Minister Rod Phillips.
Some of the industry recommendations, including a more dynamic mortgage stress test and a return to 30-year amortizations, would cost little to no new government money, says the joint report by the Building Industry and Land Development Association (BILD), the Ontario Home Builders’ Association and the Canadian Home Builders’ Association.
It suggests that if new condo owners were allowed to begin paying their mortgage immediately upon occupancy without waiting for the municipality to register new buildings — a process with growing delays — it would free up $9.5 billion of trapped liquidity to consumers, builders and lenders.
Some recommendations such as the elimination of the Ontario land transfer tax through the end of 2021 and the removal of HST on new homes for two years, would come at a cost.
Among the other ideas being floated are home renovation and energy retrofit tax credits, the elimination of GST on rental construction and renovations and, the allocation of $2 billion to roads and other infrastructure projects.
The report is really aimed at all three levels of government to meet construction industry challenges but also consumers who will be more cautious about their financial exposure in the future, said BILD CEO David Wilkes.
Wilkes said the industry recognizes that governments have already made significant investments toward COVID-19 and that municipalities are struggling with uncertainty on how to pay the operating costs on community services and transit. He said that is why builders have presented a range of options.
The priorities, he said, are around faster approvals, lengthening funding horizons and relieving the tax burden so the construction industry can get back up and running and that the Toronto region’s housing shortfall doesn’t worsen as a result of the public health crisis.
The last thing governments or industry want is to find in five years the construction cranes have moved on from the GTA, he said.
An industry analysis in the report suggests that a downturn in new housing construction could reduce the GDP by $5.2 billion and cost as much as $2.9 billion in lost wages and earnings.
“We went into this situation recognizing we had a housing shortfall. We want to make sure that shortfall is minimized as we come out of it. There is a responsibility to ensure we deliver housing, but there’s also an opportunity to help kick-start the economy by providing opportunities for construction to move quicker than it currently does,” he said.
Although construction was designated an essential business through the shutdown, public health and safety measures, supply chain issues and other delays have slowed work. A survey of BILD members found there were 498 active housing projects in the GTA, including 276 in the City of Toronto. Sixty-five per cent of those were reporting delays of three to six months and 32 per cent expected longer delays, said Wilkes.
“With the delays, there should be a hard look at costs associated with new development from development charges to other fees and charges and potentially put a freeze on those,” he said.
The industry says that government fees and taxes account for a quarter of the cost of a new home in the GTA.
Some of the measures around expedited approval times, development charges and mortgage measures to ease borrowing were items the industry lobbied for during the last federal and provincial elections.
“We have been consistent in our recommendations and our views for the last couple of years,” he said, adding that the GTA’s housing needs dovetail neatly with an economic recovery.
The residential and commercial development industry says it employs 360,000 GTA workers earning $22 billion annually. The GTA, of which construction plays a significant economic role, generates 20 per cent of Canada’s Gross Domestic Product and 50 per cent of Ontario’s GDP.