Study on HST states true cost to consumer on housing will soar

Premier Dalton McGuinty's plan to harmonize sales taxes threatens 21,200 construction jobs and will cost buyers of new homes at least $800 million, a housing industry analysis warns.


The melding of the 8 per cent provincial sales tax with the 5 per cent GST on July 1, 2010, will be especially onerous to buyers in Greater Toronto due to higher house prices, says the report commissioned by the Building Industry and Land Development Association (BILD).

GTA purchasers will pay $575 million of the $800 million, wrote Altus Group's Frank Clayton, who prepared the 28-page report, the first detailed examination of the new tax's impact since it was announced in the March 26 budget.

Prior to the budget, BILD had estimated it could cost Ontario homebuyers $2. 4 billion if the taxes were harmonized. That was before Finance Minister Dwight Duncan disclosed that residences costing less than $400,000 would effectively be exempt from the HST and there would be partial rebates for homes less than $500,000.

But new houses that cost more than $500,000 would be subject to the harmonized tax.

"The impacts will disproportionately hit new housing in the Greater Toronto Area because of its higher price level and middle-income households," wrote Clayton, whose study will be released today.

"New homes over $400,000 are not exclusively owned by the very wealthy," he noted, adding "a significant number of (such) households are classified as 'middle class.'"

About one third - 36 per cent - of all new homes sold in the GTA cost more than $400,000 and even a 10 per cent to 15 per cent reduction in demand due to the new tax would mean 7,400 to 11,100 fewer units being built.

That translates into 14,100 to 21,200 jobs in construction and related industries and $720 million to $1.1 billion in lost wages.

Interim Progressive Conservative leader Bob Runciman has tabled a motion urging McGuinty "to acknowledge that, due to the current economic downturn, this is the wrong time to move forward with his ill-advised plan to yet again increase taxes on all people of this province."

In addition to housing, the blended 13 per cent tax will boost the price of hundreds of items, such as gasoline, heating fuel, fast food, newspapers, magazines, taxi fares and dry cleaning, among other things, that are now only subject to 5 per cent GST.

Even though Liberal MPPs and cabinet ministers privately share Runciman's concern about the change, the premier insists it is full-steam ahead with the reform. "We need to do this to strengthen our economy," he told reporters.

The harmonized tax will hasten people's decisions to buy homes, said David Poon, a real estate agent with Cathedraltown, a housing development in Markham. "There's still a lot of time but I'm already seeing prospective buyers scrambling to find homes," he said yesterday.
"A lot of people want to beat the deadline. It's not making (buyers) happy. If my house costs about $500,000, I'll have to pay another $40,000 after July 1," said Poon. who called the harmonization nonsense.

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