Neil Sharma: Poilievre’s GST cut would be needed relief to homebuyers buried in taxes

Conservative Leader Pierre Poilievre’s pledge to axe the GST sales tax on homes should his government win the next election would be an excellent first step towards making housing affordable again.

Or, at least, somewhat more affordable.

When the GST was introduced on Jan. 1, 1991, by Brian Mulroney’s Progressive Conservative government, it was accompanied with a full rebate on homes up to $350,000 and a sliding scale for homes up to $450,000.  The five per cent tax was supposed to be adjusted for inflation every two years but, of course, that never occurred.

The overwhelming majority of housing in 1991 did not have sticker prices in excess of $450,000, and the GST was not intended to adversely affect housing affordability like it has.

Under the present-day Tory plan, the five per cent rebate would be eliminated for homes below $1 million, which would save homeowners up to $50,000 on the purchase of a home. On an $800,000 house, a homebuyer would save $40,000 and around $2,200 in annual mortgage payments.

Poilievre’s “Axe the tax” initiative should play well with voters, as it’s only now coming to light just how relentlessly Canadians are taxed. Nine years of Liberal rule has resulted in an unprecedented cost of living crisis that’s eviscerating a rapidly disappearing middle class, unaffordable homeownership, pricey rent, expensive food, and surging debt.

Moreover, about a third of the price of an Ontario home is a confection of taxes, many of which developers pass onto consumers, and Poilievre has identified the GST as a superfluous, and punitive, cost on short shrifted homebuyers.

Inflation is another tax, albeit a subtle one, wherein more expensive goods earn the government higher tax revenue.

But it looks like the jig’s up for the Liberals.

Although it would be tempting to blame the decades-long GST grift on the Trudeau government, because home prices have more than doubled across Canada during the Liberals’ nine-year stewardship of the country, the truth is successive governments neither indexed it to inflation, like it should have been, nor scrapped it.

The frog has consequently boiled in the pot for the last 33 years, but that could change with a Conservative victory in the next election, which could happen sooner than expected.

But while the Trudeau Liberals can be given a pass for their inaction on GST, they have created an immigration quagmire that has utterly devastated prospects for homebuyers, especially younger ones.

The government’s immigration policy-cum-boondogle is arguably the biggest culprit, according to Scotiabank — and that was before the feds ramped up immigration to record numbers the last three years. Worse still, the country is bringing in scores more of non-resident permit workers and international students, many of whom never leave. High rental prices are an obvious ramification, making it incredibly difficult for Canadians in markets like Toronto and Vancouver to stow away money for those six-figure down payments.

The average rent in Canada has increased from around $970 when Trudeau was elected prime minister to roughly $2,200 nine years into his administration’s floundering tutelage. And with something like 1,400 homeless encampments across Ontario, and—according to Food Banks Canada—fully one-quarter of Canadians living in poverty, who’s surprised?

Everything reached a tipping point in 2023 when seemingly everybody got priced out of the housing market all at once.

Poilievre said it takes 60 per cent of a family’s income to afford the average home in Canada, up from 39 per cent during the halcyon days of housing affordability. He also pointed out that housing costs have increased 40 times faster than incomes in Canada, with Vancouver the world’s third most expensive city, and Toronto its 10th, when median income and median house prices are compared.

“Getting rid of the GST on new home builds will stimulate 30,000 additional homes built every single year, which incidentally will generate more income tax revenue for the government without raising rates,” Poilievre told a scrum of reporters last Monday.

He also vaguely asserted that new home construction would generate $2.1 billion in offsetting tax revenue for the government.

Poilievre’s claim that purging the GST would catalyze the construction of 30,000 new homes countrywide every year, is not easily corroborated, perhaps a suggestion that any number of models could have been contrived to reach those figures — as is par for the course in Ottawa.

Other barriers to housing development would also have to be reformed to ensure the tax cut doesn’t ignite demand without increasing supply. But impediments — such as those pertaining to zoning, permitting and land-use rules, for example — can only be rectified at the municipal and provincial levels.

Regardless, that doesn’t diminish the integrity — and, quite frankly, the necessity, as far as swaths of Canadians are concerned — of the Tory’s pledge. Cleaving five per cent off a home purchase might be negligible in Toronto and Vancouver, but it’ll make a difference if you live around Lethbridge or the Laurentians, Shawinigan or Brandon.

Why? Because young homebuyers in Canada are especially reliant on mortgage insurance, which makes monthly payments even more cumbersome, but that need not be the case if money saved on GST is used to bolster a down payment.

Who knows—maybe putting money back into young Canadians’ pockets might encourage them to start having children again.

The Conservatives also intend to free up billions by cancelling the Housing Accelerator Fund and Housing Infrastructure Fund, which the Tory leader castigated for throwing money right back at government, further bloating bureaucracy.

But while axing the GST is a step in the right direction, substantially more is needed to restore housing affordability in Canada. There can be nary a doubt that Canadians’ need tax relief, especially on housing.

And if Poilievre is elected Canada’s 24th prime minister, the way to do that will be by putting the country’s parasitic bureaucracy in his crosshairs.

Neil Sharma is a Toronto-based journalist who covers the economy, housing market and federal politics.