Despite recent interventions by both the provincial and federal levels of government, Ontario finds itself mired in the deepest housing affordability crisis in its entire recorded history. The historical norm for a new home—maintaining a steady cost-to-income ratio of 3:1 or 4:1 for the duration of the post-war period—has been shattered. Today, that same cost-to-income ratio for a newly constructed home in Ontario now stretches well beyond 9:1, placing homeownership entirely out of reach for a growing segment of the population.
Yet, amid the sobering economic statistics, analysts point to a fundamental silver lining: this crisis is not the result of a private-market failure. Instead, it is largely policy-constructed. Because government actions and regulatory frameworks helped create the current bottleneck, targeted policy adjustments can also correct it.
The Heavy Cost of Government Policy
A major driver of the crisis is the cumulative weight of government-imposed taxes, regulatory fees, municipal levies, and development charges. These fiscal burdens now account for approximately 36 per cent of the final purchase price of a newly built home in Ontario.
Simultaneously, complex and sluggish regulatory frameworks routinely extend project approval timelines, creating administrative delays that ultimately add thousands of dollars to the final cost of housing. These government-imposed fees, compounding with high interest rates and elevated construction costs, have made numerous housing projects economically unfeasible to build at current market-clearing selling prices.
Although Ontario housing starts in 2026 are running slightly ahead of 2025 levels, industry projections indicate that construction activity will likely taper off through the remainder of the year. This anticipated slowdown is driven by soft market demand, high construction costs, and elevated inventories of unsold units. In Toronto, the impact is already visible, with housing starts dropping 10 per cent year-over-year in July.
Achieving the province’s ambitious target of building 1.5 million new homes by 2031 remains a daunting challenge. Ontario needs to construct roughly 1.24 million more homes to meet the goal. Because completions and starts since 2022 total only around 260,000 units, the province faces the formidable task of maintaining an average pace of over 218,000 housing starts per year for the remainder of the timeline—a target industry stakeholders describe as a very tall order.
Recent Measures Are Showing Results
To their credit, federal and provincial policymakers have introduced several positive steps designed to stimulate supply and alleviate financial pressures on buyers. Among the most impactful has been the introduction of a temporary Harmonized Sales Tax (HST) rebate on newly constructed homes, which has injected much-needed momentum back into a sluggish market.
During the first three months of the rebate program, which launched on April 1, Ontario recorded 8,410 new home sales. This figure represents a dramatic 130 per cent increase compared to the same period in the previous year, when just 3,645 new homes were sold.
The rebate applies to newly constructed homes purchased before March 31, 2027, yielding significant savings for everyday buyers. For instance, the incentive saves a homebuyer $130,000 on a $1-million home. The maximum discount remains capped at $130,000 for homes priced up to $1.5 million and gradually phases out for properties priced up to $1.85 million.
In tandem with the HST rebate, the provincial and federal governments announced the Canada-Ontario Development Charge Reduction Program (DCRP), an $8.8-billion fund established to assist municipalities in temporarily reducing development charges. Under this initiative, participating municipalities receive government funding if they lower residential development charges by between 30 and 50 per cent or more and commit to maintaining those reduced rates for a minimum of three years.
Development charges have long stood out as one of the most damaging barriers to housing affordability across Ontario. In the Greater Toronto Area (GTA), these charges routinely exceed $100,000 per single-family home. In certain municipalities, the combined impact of development charges and other local levies adds as much as $200,000 to the total cost of a new home—costs that are ultimately shouldered by the homebuyer.
Furthermore, the federal and Ontario governments introduced a new $1-billion funding stream dedicated to municipalities that choose not to levy development charges. This program provides $500 million from each level of government to help eligible local authorities build and renew essential housing-enabling infrastructure.
Temporary Relief Needs to Become Permanent
Despite the early success of these programs, experts emphasize that if policymakers are genuinely serious about restoring long-term affordability and permanently increasing housing supply, temporary measures must be locked in. Specifically, the temporary HST rebate and development charge reductions need to transition into permanent policy fixtures.
Solving structural economic problems requires a fundamental shift in perspective. For governments, that means abandoning the outdated practice of treating new residential construction primarily as a municipal and provincial revenue source. Instead, policymakers must recognize housing for what it truly is: an essential pillar of Ontario’s economic and social future.
To properly remedy the situation, lawmakers must first make HST relief permanent. Doing so would provide builders, buyers, and commercial lenders with the multi-year certainty that complex project financing decisions require. Such a move would also align directly with recommendations previously issued by the Senate Committee on Banking, Commerce and the Economy.
Second, the DCRP framework needs to be extended permanently beyond its current three-year window. Lost municipal development charge revenue should be replaced with a stable, predictable federal-provincial infrastructure transfer. Additionally, alternative municipal financing mechanisms—such as tax-free bonds dedicated to funding housing-enabling infrastructure—should be actively introduced and supported.
Building More Homes Means Changing the Rules
Addressing the root causes of the crisis also requires modernizing the regulatory rulebook. Industry advocates argue that Ontario must modernize the Ontario Building Code and drastically accelerate the approvals system by transitioning to a unified digital planning and building permit approval process across all 444 municipalities. Standardizing as-of-right, pre-approved building designs would further eliminate redundant bureaucratic hurdles. The Ontario government is currently reviewing the building code with an eye toward streamlining regulations and cutting red tape.
Further policy adjustments involve zoning reforms. Specifically, four-storey residential buildings should be permitted as-of-right province-wide. At the same time, policymakers must triple skilled trades immigration streams, expand funding for apprenticeship programs, adjust journeyperson-to-apprentice ratios, and heavily support off-site, modular, and factory-built construction methods to accelerate building times.
Finally, stakeholders suggest removing foreign buyer bans specifically for newly constructed housing, particularly for high-rise residential developments that require high pre-sale volumes to secure construction financing.
Ontario’s housing affordability challenge is real, deep, and deeply consequential for future generations. Shaped by decades of compounding fiscal, zoning, and administrative approvals decisions, the crisis demands a coordinated response. Industry leaders note that the time has come to permanently reshape the narrative surrounding housing development in the province.
(Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991.)