What election promises on housing would mean for Toronto and the GTA
The average home in Toronto now costs nearly 10 times the annual income of the average household
The soaring cost of home ownership is a challenge facing people across Canada, arguably nowhere more so than in big cities like Toronto.
From the 1980s through the late 2000s, the price of the average home in Toronto and the surrounding Greater Toronto Area stayed within three to five times the average annual household income.
But since 2010, that ratio has shifted dramatically. The average home now costs nearly 10 times the yearly income of the average household, based on data from the Toronto Region Real Estate Board (TRREB) and Statistics Canada.
Combine that with the fact that Toronto and the GTA account for one in six seats up for grabs nationally in the federal election and it's little wonder the main parties are trying to woo voters with promises to make housing more affordable.
Here's a look at what the Liberals, Conservatives and New Democrats are proposing to do about the cost of buying a home, and some analysis from experts about what impact that would have in Toronto's real estate market.
Removing GST off new home sales
Both Liberal Leader Mark Carney and Conservative Leader Pierre Poilievre have promised to eliminate the five per cent federal goods and services tax off the purchase of some new homes, but the promises differ.
The Liberal proposal is limited to new homes under $1 million, for first-time home buyers only. The Conservative proposal would cover a wider range of purchases: all new homes priced under $1.3 million, regardless of the buyer.
The benchmark price of a typical new condominium in the Toronto region in 2024 was $1,018,170, according to data from Altus Group and the Building Industry and Land Development Association (BILD).
There are questions about how far either proposal would go toward making the Toronto housing market more affordable.
GST is not charged on resale home purchases, and resale accounts for roughly three-quarters of the residential real estate market in Toronto, based on resale data from TRREB and new home sales data from Altus Group and BILD over the past decade.
Steve Pomeroy, a professor at the Canadian Housing Evidence Collaborative at McMaster University, says the GST cuts will help stimulate some new home construction, but says the Liberal and Conservative claims that the move would save new home buyers up to $50,000 or $65,000 off their purchases are not entirely accurate.
"It's a good 10-second political sound bite," said Pomeroy in an interview. "The reality is it's not going to have that big an effect."
He says that's because developers build the sales tax into the market price of a new home.
"You negotiate with the builder for a price and let's say you agree to $700,000, which would be a relatively modest condo in Toronto," said Pomeroy. "You don't actually then add the tax on top of that. It's already absorbed in the price, because that's the price you've negotiated."
John Pasalis, president of Realosophy, a real estate brokerage in Toronto, questions the effectiveness of extending a GST cut to all purchasers of a new home.
"How do we make it more affordable for the next generation to own?" Pasalis said in an interview. "I tend to think a policy that gives a tax benefit to first-time buyers, younger families, rather than people who are using homes as an investment is a way to get down that road."
Encouraging cities to speed up home building
The Liberals, Conservatives and New Democrats have all set targets for upping the pace of new home construction starts in Canada, which totalled 245,000 last year.
- Liberal Party: Double the current pace of construction to 500,000 new homes per year in a decade.
- Conservative Party: A 15 per cent increase in the number of new homes built each year, which would double the current pace in five years.
- NDP: Three million homes built over the next five years
To get there, each party proposes various methods to persuade municipalities to allow more new home construction.
A Liberal Party campaign document talks about "building on the success" of the federal government's existing Housing Accelerator Fund, launched in 2023.
It's providing $4 billion over four years, primarily toward housing-related infrastructure in cities that agree to higher-density housing and faster permit approvals. The Liberals say they would use the fund to reduce zoning restrictions further and to cut municipal development charges on multi-unit residential housing by half.
The New Democrat housing plan proposes to double the size of the accelerator fund to $8 billion over four years, make it permanent and re-name it the Canadian Homes Transfer. The New Democrats say they would require cities to allow more multi-unit homes in all neighbourhoods, build more housing near public transit routes and speed up permits and approvals.
The Conservative Party housing plan would require all cities to increase the number of homes built by 15 per cent each year, and would withhold a portion of federal funding from those municipalities that fall short of the mark.
Carrot vs. stick approaches
Pomeroy contrasts these as carrot and stick approaches.
"You catch more bees with honey," he said. "I think being positive and proactive and working with the municipalities is probably going to get you further than is the case of penalizing them for not doing things."
He also questions whether municipal policies are truly to blame for the slow pace of new home construction.
"As much as government wants industry to build more homes, industry basically has put the brakes on," he said.
Municipalities in the GTA have fully approved projects amounting to tens of thousands of housing units, and Pomeroy says it would be unfair to penalize municipalities when developers don't start construction.
"The builders are just choosing not to proceed with those developments because the market circumstances have changed."
In Milton, Ont., on Thursday, Poilievre unveiled a Conservative plan to encourage municipalities to reduce the development charges they levy on new housing construction. The measure would reimburse municipalities 50 per cent of the fee reduction to a maximum of $50,000 per home.
Municipal development charges in the GTA rose roughly 30 per cent between 2020 and 2022, and in some cities total more than $100,000 for a typical condo unit, according to a report by BILD.
Building affordable housing
Carney is proposing to create a new Crown corporation called Build Canada Homes that would finance affordable housing construction across the country. The agency would provide $25 billion in financing to the builders of prefabricated homes and allocate $10 billion toward affordable housing, including $6 billion in direct funding of projects and $4 billion in low-cost loans.
Poilievre's Conservatives have dismissed that idea as "more Liberal bureaucracy," and instead propose to sell 6,000 federal buildings and an unspecified "thousands of acres" of federally owned land to developers of market and non-market housing, with preference for housing deemed to be affordable.
NDP Leader Jagmeet Singh says all surplus federal land should only be used for building affordable housing and not sold to private developers.
Other NDP proposals on housing include making the temporary ban on foreign home buyers permanent and trying to discourage property flipping by taxing profits from selling a non-primary residence within five years of purchase as income rather than as a capital gain.
Pasalis is skeptical that the Liberals' Build Canada Homes proposal — which Carney is calling the most "comprehensive and ambitious" housing strategy since the Second World War — works in the GTA of the 2020s.
"Our worlds are very different," Pasalis said. "Back then, the people who bought homes were families, and in that environment we had this natural anchor, that homes could not exceed what the average household could afford."
He says that anchor "has been cut off, because houses have become a global financial asset and the money flowing into them is disproportionately coming from investors."
People buying homes not to live in but as an investment have driven up prices, Pasalis argues, pushing home ownership out of reach for many younger would-be buyers.
Another issue Pasalis sees in the GTA is the limited availability of sites that would suit the Liberals' focus on prefabricated homes.
"This idea that we can just take prefabricated plans and drop them everywhere, I think, is unrealistic," he said. "I think they have a place, but I don't think they're going to play the same role they played in our housing markets in the 1940s."
From promises to reality
While housing affordability is undoubtedly an important issue to many voters in the GTA, both housing policy experts say there are limits to what a federal government can do to bring down prices in a market so strongly influenced by supply-and-demand economics.
"Most of those policies I don't think are going to have a material impact anytime soon because supply is a very, very long term game," Pasalis said.
He says governments should invest in subsidizing the construction of affordable housing, provide incentives to encourage more purpose-built rental housing and reduce the scope for investors to fuel price increases in the residential market.
"I do think there's a role that [governments] have in making home ownership potentially more affordable by discouraging investment and speculation in houses so that the younger generation have a bit of a chance," Pasalis said.
Pomeroy says addressing the housing affordability crisis requires "serious policy" and it cannot be solved with one-off initiatives.
"I think [governments] can have some influence at the margins, but the reality is we live in a market system and the market is what sets the prices," he said.
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