Could tax cuts mean more purpose-built rentals? Some Toronto advocates hope so

Toronto housing experts are applauding the federal government's plan to remove the general sales tax on all new rental construction as a way to spur development, but caution more needs to be done to address the housing crisis.

Prime Minister Justin Trudeau announced the cut on Thursday, amid a spate of proposals aimed at easing the rising cost of living. Shortly after, Ontario's government promised to follow suit.

The province will "will work closely with Ottawa" to cut its 13 per cent harmonized sales tax for all long-term rentals, also known as purpose-built rental housing, said Municipal Affairs and Housing Minister Paul Calandra in a post to X, formerly known as Twitter.

The two announcements could prove a tipping point for some projects made unviable by rising development and interest costs, said Jennifer Keesmaat, a partner at Markee Developments and Toronto's former city planner.

"Right now we have developers who build housing ... who have, you know, folded up their hands, have laid down their pencils and are sitting it out because there are too many risks," Keesmaat told CBC Radio's Metro Morning.

"[The announcement] needs some other policy layers layered in, but it will absolutely begin to play a role in addressing that supply challenge and hopefully get developers building again."

Keesmat and other development experts agree removing taxes is a great first step. However, they say other measures are needed to get in front of the housing crisis, such as finding ways to cut red tape around project approvals and focusing on building in areas that are already developed rather than building from scratch on Greenbelt land. 

But some caution a different approach to tax cuts would do more and faster to get housing projects off the ground.

Direct funding to municipalities to build housing would be more effective, said Parkdale-High Park Coun. Gord Perks, the chair of the city's planning and housing committee. His committee has been tasked by Mayor Olivia Chow to help the city act as a developer and help it achieve the municipality's larger target of building 285,000 homes by 2031. 

The tax cut is "helpful," Perks said, but only "a small part of the cost of building housing."

"It won't change our practice at the city frankly, unless we get access to capital so that we can help not-for-profits and co-ops and public housing get built." 

Beaches-East York councillor and chair of the housing committee Brad Bradford says the tax cuts mean an unfortunate loss in revenue at a time when all levels of government are dealing with "massive budgetary pressures."

But the payoff is worth it, particularly if city councils do their part in expediting project approvals, he said.

"That's the sort of stuff that we need to do to get shovels in the ground faster," said Bradford.