Residential Construction Council (RESCON)

Will Dunning Inc.

PR Post

December 14, 2007 09:30 ET

GST Takes Growing Bite Out the Housing Market, Making New Home Ownership More Difficult for Many Canadians, Study Finds

TORONTO, ONTARIO--(Marketwire - Dec. 14, 2007) - The federal government is raking in far more in GST on new homes than it ever intended - now some $2 billion a year - driving up the cost of housing and making home ownership more difficult for many Canadians.

That's the conclusion of a new study being released today. It found that GST on the average-priced new home in Canada is now approaching $20,000 - almost double what it was in 1991. Even if the GST is reduced to 5 per cent next year, homebuyers will still be paying about $16,500 on average.

"That's a huge amount of money for anyone to have to pay, and it is especially onerous for young families and first-time buyers," said Phillip Rubinoff, Chairman of the Residential Construction Council of Ontario (RESCON) which commissioned the research.

The near doubling in the amount of GST paid per new home since 1991 has far outstripped the rate of growth in average weekly wages (39 per cent) and consumer prices (34 per cent) over the same period.

The study, conducted by Will Dunning Inc., explained that the growing tax-bite has come about because the federal government has not adjusted the rebate thresholds since the GST was introduced in 1991.

The Canadian Taxpayers Federation also expressed concern about the amount of GST that Canadians are paying because of Ottawa's failure to provide inflationary increases to GST exemptions and credits. "The federal government's failure to adjust GST credits on items like new homes hurts families the most," said John Williamson, CTF Federal Director.

When the tax was implemented, buyers of new homes were entitled to a rebate of 36 per cent of the GST on homes costing up to $350,000. The rebate declined for houses priced between $350,000 and $450,000. For homes priced at $450,000 and above, a rebate was not available. But in 1991, only 4 per cent of new homes fell into this upper category and were taxed at the full GST rate.

Seventeen years later, house prices have increased considerably while the rebate thresholds have remained the same. This has put a greater percentage of homes over the upper threshold. Today, more than one quarter of all new homes are taxed at the full GST rate. "And this is having a significant impact on housing affordability in Canada," said Rubinoff.

The study notes that when the GST and the rebate structure for new homes were introduced in 1991, the federal government made a commitment that it would review these thresholds at least every two years and adjust them as necessary to ensure that they adequately reflected changes in economic conditions and housing markets.

"That commitment has not been met," the report states. It cautions that the effective GST rate on new homes will continue to rise in the future unless the rebate thresholds are adjusted upwards.

"Cuts in the GST - from 7 per cent last year to the proposed 5 per cent next year - are definitely steps in the right direction and we commend the government," Rubinoff said. "But the cuts are not enough." Even if the GST is reduced to 5 per cent next year, buyers will still be paying an average of 67 per cent more in GST on new homes than they were in 1991.

RESCON is urging Ottawa to bring the rebates back into line by raising the thresholds by the full amount of the change in the average price of new homes since 1991, and thereafter by indexing the thresholds to the annual percentage increase in these prices.

About Will Dunning Inc.

Based in Toronto, Will Dunning Inc. is an economic research firm specializing in housing market analysis. The firm is led by Will Dunning whose experience includes 16 years with Canada Mortgage and Housing Corporation, three years in a senior position with a real estate consulting firm, and seven years as an independent consultant.

About the Residential Construction Council (RESCON)

RESCON is a builders' organization dedicated to removing barriers to new construction and eliminating unnecessary costs. It coordinates a council of trade contractor associations to address issues of common concern.

Contact Information

  • The full research study is available at
    and interviews may be arranged by calling:
    Phillip Rubinoff, Chairman
    (905) 738-2009 Ext. 223 or (416) 996-8114 (cell)
    Will Dunning Inc.
    Will Dunning
    (416) 236-5115
    Robert Stephens
    (416) 777-0368