Canadian Contractor

By The Canadian Home Builders’ Association   

CHBA calls on federal government to counter effects of rising interest rates

Canadian Contractor

July 27, 2023 – The Canadian Home Builders’ Association (CHBA) is calling on the federal government to implement policies to help counter the effects that rising interest rates are having on access to housing and the construction of more housing supply.

“The federal government has stated we will need to double housing starts and build some 5.8 million new homes over the next decade to address the current housing supply crisis and address affordability,” said CHBA CEO Kevin Lee, said in a press release. “However, would-be buyers are continually finding themselves unable to afford purchasing a home, and renters are having challenges finding affordable rental too, due to prolonged rate hikes, challenging mortgage rules, lack of supply, development taxes and more—all of which are dramatically eroding affordability.”

“With these high interest rates, we need policy adjustments that will support home buyers and purpose-built rental construction now, to avoid any more slowdowns in the creation of housing supply; and we will still need them after interest rates return to more normal levels if we are to truly pursue addressing the housing supply shortage,” added Lee.

Given the state of deteriorated affordability, CHBA advises that there needs to be targeted measures to allow well-qualified first-time buyers to enter the market to help supply get back on track. “A return to 30-year amortizations on insured mortgages for well-qualified first-time buyers would be a perfect tool to address the challenges Canadians are facing and to get more housing built,” said Lee, “We can’t just state ‘we need more houses’ without policy change to support that, otherwise it simply won’t happen.”


Another direct way to support housing affordability is to update the GST New Housing Rebate thresholds, which were set in 1991 and have not changed once since, despite the fact that house prices in Canada have more than doubled on average over that period, and have risen even more in Canada’s larger urban centres. “The $350,000 to $450,000 thresholds that were set for the rebate need to be at least doubled immediately, since most homes in major cities are priced well above that threshold. An increase in the thresholds for the rebate would have direct affordability benefits, especially for first-time buyers,” Lee says.

Changing the GST thresholds would support purpose-built rental as well, though CHBA has been advocating for completely zero-rating GST/HST on construction on purpose-built rental, or at least having its payment deferred until the sale of the building. This would help to make the construction of more purpose-built rental viable from a development perspective; tax treatment on purpose-built rental over the past three decades has contributed to a major shortage of rental units in Canada, particularly in our larger urban centres.

The other policy lever that the federal government should use is more investment for housing-enabling infrastructure. This will help accelerate more development and ideally help alleviate the astronomical development charges being levied against new home development. Currently, 31 per cent of the cost of a new home in Ontario is comprised of government-imposed costs, according to the Canadian Centre for Economic Analysis. And a significant proportion of these are municipal development taxes that have increased by some 700 per cent over the past two decades—a trend that needs to be reversed.

“It will take a comprehensive approach to solve Canada’s housing supply and affordability crisis; an approach that supports new homebuyers’ ability to access the market, enables investment in purpose-built rental, avoids adding new costs to housing of all types, and removes barriers to more housing supply that is desperately needed,” Lee said.


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