There have been recent upticks in construction, but Canada is still not building nearly enough homes to meet established targets. Regulatory red tape, high taxes, fees and development charges are the primary obstacles preventing the industry from keeping pace with demand.
Canada needs as many as 4.8 million new homes by 2035, yet current construction is running at only about 250,000 to 260,000 units per year. At that rate a substantial shortfall will emerge. Ontario alone projects roughly 64,800 new units this year, far below the trajectory required to reach the provincial share of 1.5 million homes over the next decade.
Investment in residential construction is also softening. Statistics Canada reports $22.6 billion invested in building construction in March, a decline of $304.6 million (1.3 per cent) from February, indicating cooling momentum in the sector.
The bureaucracy problem
Government regulations and administrative delays have hampered the housing sector’s ability to respond to changing demand. An analysis by the Canada Mortgage and Housing Corporation shows that excessive bureaucracy has slowed approvals and complicated development processes, making it harder and slower to add new supply.
The CMHC analysis finds that housing starts in Canada could have been nearly 30 per cent higher between 2006 and 2024, and home prices roughly 10 per cent lower, if the Canadian industry had matched the responsiveness of the U.S. market. The report attributes much of this gap to regulatory conditions alongside structural economic and demographic factors.
Canada’s land-use and development rules are generally tighter than those in the U.S., which makes it more difficult to increase housing supply quickly. That regulatory environment helps explain why Canada ranks poorly among developed countries in terms of new housing delivery.
The encouraging news is that many solutions are within policymakers’ control: streamlining regulations, modernizing approvals, and removing barriers that slow construction could significantly improve housing supply.
Taxes and fees are driving up costs
Industry groups such as RESCON and independent researchers have long called for cutting bureaucracy, simplifying and digitizing approvals, and reducing taxes, fees and levies like development charges (DCs) that add materially to the price of new homes.
Research from the Canadian Centre for Economic Analysis (CANCEA) in 2024 found that government-imposed taxes, fees and levies account for about 36 per cent of new housing costs in Ontario, up from an average of 31 per cent in 2021. That rise increases the financial burden on buyers and raises the overall cost of adding supply.
Another CANCEA analysis suggests that a temporary cut to the Harmonized Sales Tax (HST) on new housing in Ontario — if applied for three years — would still generate net positive government revenue, preserve more than 25,000 residential construction jobs and contribute roughly $3.9 billion to the economy.
Some movement, but not enough
Political and policy responses have been uneven. Some jurisdictions have begun to act, while others have delayed implementation of promised measures. Announcements are helpful, but without timely follow-through they have limited effect.
For example, the HST rebate announced more than a year ago still lacks finalized regulations, delaying the intended relief. Temporary HST rebates should be made permanent, in our view, and excessive DCs must be substantially reduced. These reductions should be paired with a fair, new government funding formula to cover growth-related infrastructure instead of disproportionately burdening new-home buyers.
There has been a positive recent step: the Ontario and federal governments opened applications for the Development Charge Reduction Program, which will provide funding over 10 years to municipalities that cut DCs for all residential types by 30 to 50 per cent or more and maintain those reductions for at least three years. This program could relieve some pressure if implemented quickly and broadly.
Relief is sorely needed. In Toronto, development charges have surged by more than 1,000 per cent since 2009, climbing from roughly $12,000 to nearly $138,000 for a single-detached home. Those fees are factored into sale prices, further straining already stretched buyers.
The development approval process also remains slow. In the Greater Toronto Area, approvals often take 14 to 25 months — nearly double the national average. Each month of delay increases carrying costs, financing risk and uncertainty for builders, who must recover those expenses through higher prices for buyers.
Time for action
More decisive action and faster implementation are essential. Canada’s decentralized governance can create gaps in responsibility, allowing one level of government to point to another. Rather than assign blame, federal, provincial and municipal governments need to coordinate and act together to tackle the housing shortfall.
Streamlining approvals, reducing unnecessary fees and development charges, modernizing planning systems and adopting targeted tax measures would help accelerate construction and lower costs. Aligning incentives and sharing the burden of infrastructure funding fairly will also make housing more attainable.
Solving Canada’s housing challenge will require sustained, cooperative effort across governments and industry. With coordinated policy changes and quicker implementation, it is possible to boost supply, ease cost pressures and make housing more accessible for Canadians.