Ontario stands at a pivotal moment, facing a choice on housing policy that carries enormous consequences for its economy, workforce, and future residents. According to analysis, the province must urgently consider cutting the provincial portion of the Harmonized Sales Tax (HST) on the first $1 million of a new home's value. This targeted, time-limited measure is presented as a critical step to revive a faltering sector, preserve up to 100,000 jobs, and safeguard over $8 billion in annual government revenues.
A Sector in Structural Crisis, Not a Cyclical Dip
The warning is not theoretical but grounded in stark data from the past year. New home sales across Ontario collapsed to approximately 15,000 units in 2025, a dramatic fall from the historic norm of between 65,000 and 85,000 annual sales. This precipitous drop signals a deep structural breakdown within the housing industry, which traditionally supports about 225,000 jobs and generates $30 billion in economic activity for the province.
This crisis is fueled by a perfect storm of challenges: high construction costs, elevated interest rates, broader economic uncertainty, severe affordability pressures, and global trade tensions. These factors have made it extraordinarily difficult for new housing projects to proceed financially. Simultaneously, prospective buyers, facing high prices and shaken confidence, are retreating from the market entirely.
The Dire Economic and Fiscal Fallout of Inaction
The ripple effects of collapsing sales are now cascading through the entire housing pipeline. Housing starts are following sales downward, with projections suggesting they could bottom out at around 40,000 units per year by 2030—roughly half the recent annual average. This level of activity would represent a catastrophic contraction in construction, plummeting from approximately $31.7 billion in 2024 to a mere $10.4 billion by the end of the decade.
The human cost of this contraction is staggering: roughly 100,000 jobs are at immediate risk, with 50,000 positions directly in construction and another 50,000 in related supply chains and supporting industries. The fiscal consequences for public coffers are equally severe. The province could face annual revenue losses of $2.4 billion in HST, $1.4 billion in income tax, and $700 million in land transfer tax. Municipal governments would also lose an estimated $3.9 billion each year in development charges and fees.
A Prescribed Path Forward: Targeted HST Relief
The proposed solution is a focused, temporary intervention. For a period of two to three years, the province would remove its portion of the HST on the first $1 million of value for all newly built homes sold. The tax would still apply to any value above that threshold, ensuring continued revenue for the government while delivering meaningful relief where it is most needed to stimulate demand.
Advocates argue this measure would act as a powerful incentive to bring hesitant buyers back into the market, restore consumer confidence, and allow financially stalled projects to move forward. By doing so, it would break the current negative feedback loop where declining sales lead to declining construction starts, which then reduces housing supply, employment, and government revenues.
The central argument is clear: inaction is not a neutral position that protects public finances. Instead, it actively erodes them while inflicting long-term damage on a cornerstone of Ontario's economy. The province has a rare, clear opportunity to take decisive action that benefits households seeking homes, workers needing jobs, businesses requiring stability, and governments reliant on a healthy tax base. The stakes for Ontario's future are indeed enormous.
