The Residential Construction Council of Ontario (RESCON) has commended the proposal put forward by the federal Conservatives to axe the federal sales tax on new homes up to $1.3 million, saying the move will bring down the cost of new housing and spur sales.

“Builders have been urging both the federal and provincial governments to remove the sales taxes to reduce the cost of new housing and spur construction of residential development,” said RESCON president Richard Lyall. “This plan is bold and forward-thinking and will save buyers tens of thousands of dollars on the purchase of a new home. This is certainly good news.”

Last fall, the Conservatives announced the GST would be eliminated on new homes valued up to $1 million. This latest announcement raises the amount by $300,000 and more accurately reflects market realities, RESCON says.

The benchmark price for a new home in the City of Toronto is now $1.089 million. The Conservatives say axing the GST will save homebuyers up to $65,000 on the purchase of an average home in our big cities and roughly $3,000 every year in mortgage payments.

Taxes are the main reason for the housing crisis. Regressive taxes, fees and levies on new housing, a vital economic need, became a runaway train increasing an average of 17 per cent a year, well in excess of any tenable ability to pay. RESCON has been advocating for tax cuts for years, watching the situation progressively get worse.

“This proposed tax cut is crucial and a step in the right direction towards making new homes more affordable, especially for first-time homebuyers,” said Lyall. “Sales taxes on new housing in the Greater Toronto Area are among the highest in North America and have pushed new homes beyond the reach of most working Canadians. High taxes and development charges are one of the reasons for the housing crisis. This is a travesty that cannot continue.”

A report done by Canadian Centre for Economic Analysis found that the tax burden on new home construction is two times higher compared to other sectors of the economy. Taxes on the purchase of a new home have climbed from about 24 percent in 2012 to 36 percent today.