Conservative Leader Pierre Poilievre is proposing to scrap the federal sales tax on new build housing, claiming that this will help lower mortgage costs and speed up homebuilding.
Poilievre said in a news conference in Ottawa on Monday that as prime minister, he would axe the goods and services tax on new houses that are sold for less than $1 million.
Poilievre claimed that this tax cut could save Canadians $40,000 in total or $2,200 per year in mortgage payments on a $800,000 house and help build 30,000 new homes each year.
“We will also cut bureaucracy. We’re going to cut the programs that Liberals themselves admit haven’t built any homes,” he told reporters.
Poilievre said he would scrap the Liberal government’s Housing Accelerator Fund and the Canada Housing infrastructure Fund to pay for the sales tax cut.
Over several years, this plan would save the government a total of $8 billion, he added.
In Canada, homebuyers only have to pay the GST/HST when they purchase a new house directly from the developer.
According to the Canada Revenue Agency, sales of used owner-occupied homes are usually exempt from GST/HST.
“In most cases, the GST/HST does not apply to the sale of an owner-occupied home since the owner is not a builder. Only homes sold by builders are taxable,” the CRA states on its website.
Poilievre said that without the tax on new build housing, businesses will pass on those savings to consumers, “because if they don’t, then the buyers will buy from someone else.”
The Greater Ottawa Home Builders’ Association welcomed the Conservative proposal, saying this change would mean that new townhomes in the capital would be eligible for a full GST rebate.
The association estimates that government-imposed taxes and fees, including the HST, account for approximately 20 per cent of the average new home cost in the capital.
“Increasing the GST Rebate threshold will support affordability, increase housing supply, and restore fairness to current and future generations of homebuyers,” Jason Burggraaf, executive director at GOHBA, said in a statement.
Mike Moffatt, senior director of policy and innovation at the Smart Prosperity Institute, said axing the GST is an “incredibly bold measure” to restore housing affordability and to get more homes built.
“This plan is far more bold than anything we’ve seen from the government,” he said in an interview with Global News.
Moffatt said the benefits of the plan will be split between homebuyers and builders.
If implemented, home buyers could get up to $50,000 of the GST that they pay in newly constructed homes back, he said.
“That’s going to be making buying a newly constructed home more attractive and should increase homebuilding.”
Moffatt said an additional 30,000 homes being built per year under this proposal is a “reasonable estimate” as the Tories have claimed.
Housing Minister Sean Fraser criticized the Conservatives for not thinking this proposal through, saying it cuts programs that build housing for middle-class and low-income families.
“They came up with this stuff on the backside of a napkin after Googling housing for five minutes,” Fraser said during question period in the House of Commons on Monday.
“We’re going to follow the advice of the people who are building homes and talk to the people who have lived experience with housing.”
Starting Dec. 15, first-time homebuyers, as well as those purchasing new builds, will soon be able to take out insured mortgages with a 30-year amortization, up from the typical 25-year payback period.
In an announcement last month, Deputy Prime Minister and Minister of Finance Chrystia Freeland said that the price cap for taking out insured mortgages would be raised to $1.5 million compared with the previous bar of $1 million.
Meanwhile, the federal government last week announced reduced immigration targets for the next three years, which some experts say will have an impact on housing affordability as early as next year.
The Liberal government is planning to build almost 3.9 million homes by 2031 as part of an ambitious housing plan that was unveiled earlier this year.
The parliamentary budget officer has estimated that Canada would need to build 3.1 million homes by 2030 to close the housing gap.
Immigration Minister Marc Miller said last week that the reduced immigration targets could reduce Canada’s housing need by as much as 670,000 units by the end of 2027.
— with files from Global News’ Mackenzie Gray, Craig Lord and Uday Rana and The Canadian Press.