As part of its $214.5 billion 2024 budget unveiled today, the Government of Ontario rolled out several housing initiatives aimed at increasing supply and facilitating the development of purpose-built rentals.
The investments include a three-year $1.2 billion “Build Faster Fund” to help expedite the construction of new housing along with increased funding for core housing infrastructure.
The overall investments made throughout the budget come at the expense of a balanced budget, with the province now projecting a deficit of $9.8 billion in the coming fiscal year—nearly double its initial estimate in its Fall Economic Update.
Ontario budget housing highlights
The following are highlights of the government’s key housing related announcements contained in its 2024 budget.
Housing supply and infrastructure
The government announced it will dedicate $1.2 billion over three years to incentivize municipalities that meet or exceed housing construction targets.
This fund aims to streamline the housing development process, encouraging faster construction to help alleviate the housing supply shortage in Ontario.
- Municipal Housing Infrastructure Program
The government is allocating $1 billion towards core infrastructure projects through an investment in the Municipal Housing Infrastructure Program. By focusing on core infrastructure, the program is expected to support the foundational needs for residential construction, enabling more homes to be built.
- Increased funding for the Housing-Enabling Water Systems Fund
With an increase to $825 million, this fund targets municipal water infrastructure projects, a vital component of new housing developments.
Additional housing initiatives
The province is expanding the authority for all single- and upper-tier municipalities to impose taxes on vacant homes, aiming to increase housing supply and improve affordability.
The government said this extension, previously available to cities like Toronto, Ottawa, and Hamilton, will allow more municipalities to discourage home vacancies. A new provincial policy framework will guide the implementation of Vacant Home Taxes and encourage municipalities to set a higher rate for foreign-owned vacant properties.
- Non-Resident Speculation Tax
Ontario has updated its Non-Resident Speculation Tax (NRST) to further address the impact of foreign investment on the housing market with a stated goal of ensuring more homes are available for Ontario residents.
Initially, the tax was expanded across the province and increased from 15% to 25% in 2022. The government is now focusing on additional amendments to enhance the NRST’s effectiveness, ensuring compliance and promoting fairness in the housing market. The government says these steps will help deter speculative buying by foreign entities and “improve fairness” for the people of Ontario.
- Lowering taxes on purpose-built rental properties
The government pointed to two initiatives aimed at supporting the construction of purpose-built rental housing in the province:
- The removal of HST for new purpose-built rentals:As was previously announced in the fall, the province has updated the HST New Residential Rental Property Rebate to eliminate the 8% provincial portion of the tax on new purpose-built rental properties, including apartments, student, and senior housing, starting projects between September 14, 2023, and December 31, 2030. This aligns with federal efforts to remove its portion of the tax on such projects, resulting in the total removal of the 13% HST on qualifying builds.
- Municipal tax flexibility for rentals: Ontario now allows municipalities the flexibility to apply reduced property tax rates on new multi-residential rental properties. This immediate policy change gives local governments the tools to encourage the development of rental housing, addressing affordability and availability.
- Investing in modular construction
The province is implementing an “attainable housing program” to facilitate home ownership for more families, with an emphasis on modular construction and other innovative building methods to quicken development and improve affordability.
This approach not only aims to expand the availability of affordable housing, but also supports the growth of local industries and job creation, the government says.
Reaction to the government’s housing initiatives
While the focus on addressing the province’s housing supply shortage and affordability challenges was welcomed by several industry associations, questions remain over whether it will be enough.
A member notice sent by Mortgage Professionals Canada drew attention to the fact there were roughly 89,000 housing starts in Ontario in 2023, well short of the province’s target of 125,000 for this year. The province is also targeting 175,000 annual starts by 2026 to meet its goal of building 1.5 million new homes by 2031.
“This is why we will continue to advocate for policies at both the federal and provincial level aimed at increasing supply, lowering costs, and ultimately helping more Ontarians achieve the dream of home ownership,” MPC’s member note reads.
The association continues to advocate for initiatives such as allowing the Property Transfer Tax to be paid in instalments, increasing the land transfer tax for first-time buyers from $4,000 to $8,000, revising the provincial HST New Housing Rebate to align with current home prices, and streamlining the development approval process.
Ontario Real Estate Association (OREA) President and CEO Tim Hudak applauded the investments in building more homes, but said the government “must keep their foot on the gas and take bold action,” in order to achieve its target of building 1.5 million homes.
“Building more homes on existing properties is an essential key to unlocking affordable homeownership,” he said in a release. “Several municipalities, including Toronto, London, and Barrie, have led the way by proactively enabling four units as-of-right per lot, and it remains a key recommendation of the Province’s own Housing Affordability Task Force.”
