When construction cranes start disappearing from city skylines, economists get nervous. In Toronto and Vancouver, that’s already happening—pre-sales for new condos have slumped, layoffs are mounting, and builders are sitting on unsold inventory. Now Ottawa is trying to reverse the slide with a tax cut it hopes will ripple across the country.
Housing Minister Gregor Robertson confirmed this week that the federal government is negotiating with every province and territory to eliminate the GST on new home purchases for one year. The move follows a joint announcement with Ontario last week that scrapped the 13 per cent HST on new homes under $1 million. Robertson told Global News the goal is simple: get shovels back in the ground before the housing slowdown becomes a full-blown construction crisis.
“There are going to be very few housing starts in the next couple of years because the pre-sales have been so low,” Robertson said. “We’re certainly seeing layoffs in the building sector in Toronto and Vancouver. The construction jobs unfortunately will be impacted in the next year or two, so you know we’re going to see a ripple effect here. That’s what we’re trying to prevent.”
The Ontario deal offers a maximum rebate of $130,000 on homes valued up to $1.5 million, with proportional decreases for pricier properties. Both governments also committed $8.8 billion over a decade to fund infrastructure in Ontario cities that agree to cut development charges—the municipal fees developers pay for sewers, roads, and other services tied to new subdivisions. It’s a carrot-and-stick approach: provinces need to bring money or new legislation to the table, and municipalities have to play along by lowering their own fees.
Robertson didn’t specify when deals with other provinces might land, but he acknowledged the complexity. “That does take some negotiating. The provinces have to do the follow-through, working with local governments,” he said. “There’s some details to work through here.”
British Columbia is already watching closely. Vancouver Mayor Ken Sim issued a public plea to Premier David Eby on Thursday, urging him to secure a matching deal with Ottawa. “We know the only way to improve long-term affordability is to keep building more homes,” Sim said. “This is a window of opportunity for the province to partner with the federal government and municipalities to lower costs and deliver the homes people need.” Vancouver has been hit particularly hard by the condo slowdown, with high interest rates and tighter mortgage rules chilling buyer demand.
The timing of the GST cut reflects deeper anxiety about Canada’s housing pipeline. The Canada Mortgage and Housing Corporation projects new home construction will decline through 2028, dragged down by higher costs, weaker demand, and a growing pile of unsold condos. Developers who once counted on strong pre-sale numbers to finance new projects are now stuck with units they can’t move. That hesitation translates into fewer housing starts, which means fewer construction jobs and less supply in a market already short millions of homes.
Critics, including the federal Conservatives, argue the tax cut doesn’t go far enough. They’ve called for a permanent elimination of the HST on all new housing, regardless of price. Robertson pushed back on that idea, framing the one-year cut as a targeted stimulus rather than a long-term policy shift. “I think that the point right now is to really infuse some momentum in the market, especially in Ontario and B.C., where they’ve been struggling,” he said.
Whether a one-year reprieve can actually restart stalled projects is an open question. Developers face a cocktail of challenges: elevated borrowing costs, rising material prices, and zoning delays that stretch timelines and budgets. A temporary tax break might coax some buyers off the sidelines, but it won’t solve the structural issues that make housing so expensive to build in the first place. And if buyers rush in only to watch the tax return next year, the market could face another lull once the incentive expires.
The infrastructure funding tied to the Ontario deal is arguably the more meaningful piece. Development charges can add tens of thousands of dollars to the cost of a new home, and cities rely on them to offset the burden of expanding services. By offering provincial and federal cash in exchange for lower charges, Ottawa is betting it can ease one of the hidden cost drivers in homebuilding. But municipalities are unlikely to slash fees without guarantees they can still fund the roads, transit, and utilities new neighborhoods demand.
Robertson framed the negotiations as urgent, pointing to early signs of a construction slowdown that could cascade into broader economic trouble. Construction employs hundreds of thousands of Canadians, and a prolonged downturn would hit tradespeople, suppliers, and adjacent industries. The minister didn’t say it outright, but the subtext is clear: this isn’t just about housing policy—it’s about protecting jobs and keeping the economy from stalling.
Still, the politics are tricky. Provinces control their own sales taxes, and getting them to surrender revenue—even temporarily—requires Ottawa to offer something valuable in return. Some premiers may see the GST cut as a lifeline for struggling builders. Others might view it as federal overreach into provincial jurisdiction, or question whether a tax break for buyers making six-figure down payments is the best use of public funds.
What remains unresolved is whether cutting taxes on new homes will actually make housing more affordable in the long run. A $130,000 rebate is significant, but it doesn’t change the underlying math: mortgage rates remain elevated, wages haven’t kept pace with prices, and the supply shortage persists. If the tax cut simply props up demand without a corresponding surge in construction, it could just shift money from government coffers to developers’ balance sheets.
Robertson’s timeline—or lack of one—suggests the provinces aren’t rushing to sign on. Each will weigh the fiscal cost against the political benefit, and some may hold out for better terms. In the meantime, builders are watching their backlogs shrink and construction workers are watching job boards. Whether Ottawa’s tax cut becomes a nationwide policy or a one-off experiment with Ontario depends on negotiations happening right now behind closed doors.
For now, the message from the federal government is clear: they want provinces to move, and they’re willing to spend to make it happen. Whether that’s enough to reverse the slowdown—or just delay it—will depend on what comes next.
