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Why Lower Construction Costs and Taxes Are the Only Path to More Homes and Lower Prices

missingmiddleinitiative.ca · 2,001 words · saved by 1 readers

Home prices have fallen by 20% in the GTA over the past three years, which has helped the region make some progress towards affordability. However, the sale of newly constructed and pre-construction homes has decreased by over 90% in the GTA in the last three years, encompassing all forms of housing, from high-rise condos to single-family homes. A Bank of Canada study suggests that a 20% price drop from a demand shock should have led to home sales falling by 20-40%, not 90%. The oversized reduction can be attributed to an inherent “price floor” for new housing. Once a certain threshold is reached, prices are insufficient to cover the cost of building, and activity stops. This poses a significant challenge for governments, which aim to achieve both housing affordability and robust growth in housing supply. However, all else being equal, lower prices reduce the viability of building. The only way to achieve both housing affordability and robust supply growth is through a program of subst

Why Lower Construction Costs and Taxes Are the Only Path to More Homes and Lower Prices The GTA as an alarming case study Missing Middle Initiative Jul 22, 2025 16 3 Share Highlights Home prices have fallen by 20% in the GTA over the past three years, which has helped the region make some progress towards affordability. However, the sale of newly constructed and pre-construction homes has decreased by over 90% in the GTA in the last three years, encompassing all forms of housing, from high-rise condos to single-family homes. A Bank of Canada study suggests that a 20% price drop from a demand s

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