Greater Toronto Area homebuyers will absorb an exorbitant share of the whopping $800 million tax increase on new homebuyers across the province under the Provincial government’s harmonized sales tax (HST), which could threaten up to 21,200 jobs, a new report released by the Building Industry & Land Development Association (BILD) revealed today.
The report, titled “Big Hit on GTA Middle-Class Homebuyers with the Ontario Budget’s HST Proposals,” reveals that GTA new homebuyers will absorb $575 million or nearly three quarters (72%) of the $800 million tax increase while accounting for less than half (45%) of new home sales in Ontario.
The report further reveals that middle-class families get hit the hardest
by the $800 million tax increase despite the fact that homes over $400,000 are not just purchased by “wealthy” Ontarians. In fact, 30 per cent of homebuyers who purchase new homes between $400,000 and $500,000 have an annual income of $70,000 or less, while half have an income of $100,000 or less and are firmly “middle-class,” the report discloses.
The report was written for BILD by veteran housing analyst Frank Clayton,
PhD, of Altus Group as a sequel to Housing is Different: Implications of Sales
Tax Harmonization on New Home Buyers in Ontario, released by BILD prior to the provincial budget.
In his latest report, Clayton says the sharp rise in the effective tax
rate on new homes over $400,000 “cannot avoid having negative repercussions on the demand for new homes.” Even a 10-15 per cent decline in the level of demand for new homes because of the tax translates into 7,400 to 11,100 fewer new housing starts which equates to 14,100 to 21,200 fewer jobs.
“The way this tax so heavily penalizes hard working middle-class families
in the Greater Toronto Area is as unfair as it is contradictory,” said Stephen
Dupuis, President and CEO of BILD. Purchasers of new homes over $400,000 are solidly middle-class families that would not be subject to the high income surtax or even the highest tax bracket. In fact these same households would qualify for the Province’s $1,000 HST transition rebate which would not even come close to offsetting the increased tax they will be paying on their new homes,” Dupuis stated.
The Altus report offers the provincial government a range of solutions to
fully or partially offset the tax increase with the preferred option and
fairest approach for middle-class new homebuyers in the GTA being the
elimination of the $400,000 price threshold.