TAX HARMONIZATION AND HOUSING

There is no harmony in the tune the Provincial Government is singing to the home building industry or the new homebuyer.

Waterloo Region - If the Province is successful in adopting the proposed harmonized GST and PST legislation then consumers in Waterloo Region will join their counterparts in the GTA by absorbing a disproportionate share of the whopping $800 million tax increase that will be paid by new homebuyers across the province.

A report, titled "Big Hit on GTA Middle-Class Homebuyers with the Ontario Budget's HST Proposals," released by the Building Industry and Land Development Association (BILD) 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.

In very simple terms, a new home priced at $400,000 would receive a rebate of 75% of the provincial portion of the sales tax. New homebuyers would effectively be paying a 2% provincial tax that is about the same amount paid under current tax law. But jump the price of the home to $500,000 and you will enjoy paying a whopping $32,000 in brand new tax. Bear in mind that this cost will be amortized on a buyer’s mortgage and the financial impact becomes truly frightening. The tax will be devastating to housing affordability in this Province and can result in significant jobs losses in the construction sector at the worst possible time for the provincial economy as consumers purchase fewer new homes.

Unconsidered consequences of this hastily assembled tax grab include the fact that the full 8% tax increase will be placed on the same renovation industry that the recent Federal budget was trying to boost. This will most certainly entice more renovators to move into the underground economy… a problem that both the Federal and Provincial governments have cited as an area of distinct concern. The full 8% tax will be applied to rental housing whether it is market drive or social in nature.

This adversely affects the most vulnerable people in our society. Given that there is no rebate on a unit that is NOT a primary residence the actual rental supply will also be negatively affected. Let me be very clear. The Home Building industry is not opposed to the harmonization of the PST and GST, but we are adamantly opposed to the way the current proposal is structured. The Province needs to establish transitions rules….we need to know if a home sold today but delivered after July 1, 2010 will be subject to the tax. The inordinate jump in tax between the $400,000 and $500,000 price points needs to be transitioned and the tax certainly needs to be revenue neutral for the renovation and rental sectors.

We need our Liberal MPPs to take action to make this new tax structure truly harmonized instead of throwing discord into an industry that provides the best prospect to alleviate our current economic woes.

WRHBA is actively involved in all facets of the new home construction and residential renovation industries. It is a voluntary association whose primary goal is to positively impact the communities where their members and their customers live, work and play. Through ongoing representation to municipal government, media relations and consumer education, they address important issues head on and have a strong presence that benefits members and contributes to housing affordability and the well-being of communities in the Region of Waterloo. Visit www.wrhba.com for further association information.