RCCAO report calls out federal under-investing in public infrastructure
A new study commissioned by the Residential and Civil Construction Alliance of Ontario (RCCAO) is calling out the federal government for under-funding municipalities and public infrastructure.
Released on April 17, the research report, Will Feds Answer the Call? Infrastructure Investment Lags Amidst Highly Taxed Housing Construction was authored by the Canadian Centre for Economic Analysis. It finds that while the federal government collects the greatest proportion of tax dollars from high-tax policies on homebuilding, it is lagging when it comes to funding its fair share of local public infrastructure.
Cumulative underinvestment in public infrastructure across all three levels of governments in Ontario reveals the federal government has the greatest capacity to close the gap to the best practice recommendation of 4% of GDP spending on public infrastructure, says RCCAO.
The research showed public infrastructure investment is 30% below what economic analysis recommends, while production taxes on new housing construction are the highest of any sector.
“The high taxes on housing construction and underinvestment in public infrastructure is a problem the federal government is uniquely positioned to resolve,” said Nadia Todorova, Executive Director of RCCAO. “Ontario cannot realize economic and immigration growth goals without the support of the federal government increasing funding for public infrastructure.”
In light of the research findings and industry challenges, RCCAO is calling on the Government of Canada to:
- increase public infrastructure funding to enable immigration and economic growth policies to be realized,
- provide long-term, sustainable funding to municipalities to enable greater investment and planning in public infrastructure development and maintenance, and
- continue the expansion of immigration programs that welcome skilled construction workers to Canada to address infrastructure and housing labour force challenges.
The report finds that the tax burden on new home construction is two times higher compared to the rest of the economy. It adds that while the federal government collects about 39% of the taxes on new home construction, it returns just 7% to public infrastructure.
The report findings are being backed up by the Residential Construction Council of Ontario.
“The federal government is benefitting massively from the growth of the Ontario economy but not reinvesting enough of the tax revenues it receives from new housing development into public infrastructure,” said RESCON president Richard Lyall. “Both now and over the past decades, this has created unprecedented funding challenges for provincial and municipal governments. We are in the midst of a generational housing crisis. It is critical that the federal government finally establish stable, predictable and substantial infrastructure funding for Ontario and its municipalities.”
RESCON says the federal government’s failure to return funding to public infrastructure puts a strain on local governments and impedes construction at a time when the feds are increasing immigration targets without regard to housing supply. While Ontario’s population has grown by 68 percent since the 1970s, the number of annual new housing completions has dropped by 23 percent.
“The present level of federal investment in public infrastructure falls far short of what is needed to sustain our communities and contribute to economic growth,” said Lyall. “Residential construction of new homes and investments in public infrastructure are critical to the economic growth of Ontario and all of Canada. The federal government is contributing too little compared to the amount of revenue it generates.”
The report suggests that public infrastructure investment funding in Ontario required to support growth trends is 30 per cent below what is required. This only exacerbates the critical need for increased federal public infrastructure investment to help ease housing unaffordability in Ontario.
“This ongoing lack of support is one of the reasons we have the worst housing affordability crisis in Ontario’s history,” said Lyall. “It is very difficult for developers and builders to build more homes – and for the public to afford them – when taxes account for such a large chunk of the cost and the funds are not being properly reinvested into public infrastructure for the future. It’s a travesty.”