The federal government’s newly announced budget reaffirms earlier pledges to supercharge homebuilding and cut sales taxes to improve affordability.
Canada has been struggling to construct homes rapidly enough to ease its housing shortage. According to the Canada Mortgage and Housing Corporation (CMHC), restoring housing affordability to 2019 levels means that residential construction must nearly double to between 430,000 and 480,000 units per year over the next decade. Meanwhile, the Parliamentary Budget Officer estimates 290,000 units annually would be needed to close the supply gap.
After 25 years of sluggish productivity, Canada’s construction costs remain high. Ottawa hopes to reverse the trend by cutting red tape and removing barriers that keep builders from scaling up. Budget 2025 confirmed its commitment to Build Canada Homes. The new federal agency, which launched in September 2025, has a mandate to move quickly on the affordable supply issue and is focusing on non-market housing.
An initial investment of $13 billion over five years will begin this fiscal year, targeting its first four initiatives. These include: developing six public-land projects to deliver 4,000 factory-built homes, with potential for 45,000 more across Canada Lands Company sites; providing $1 billion to build transitional and supportive housing for people who are homeless or at risk of homelessness; protecting existing affordable housing by launching the $1.5 billion Canada Rental Protection Fund; and partnering with the Nunavut Housing Corporation to build more than 700 public, affordable, and supportive housing units.
Training next gen builders
To meet Canada’s ambitious housing targets, the federal government has highlighted its commitment to supporting the next generation of builders by investing in programs to equip workers for these well-paid careers.
A $75-million investment over three years, beginning in 2026-27, will go to Employment and Social Development Canada to expand the Union Training and Innovation Program, which supports union-based apprenticeship training in the Red Seals trades.
Tax reforms
With the foreign buyer ban and municipal and provincial vacant home taxes already in place, Ottawa sees little need for the Underused Housing Tax and will scrap it to simplify the system and minimize costs for both taxpayers and government.
The UHT is a 1% annual tax on vacant or underused homes, designed to deter foreign ownership and push owners to rent or sell unused properties; however, it will be cancelled beginning in 2025.
As previously announced, Canada is also eliminating the Goods and Services Tax (GST) for first-time home buyers on new homes up to $1 million and reducing the GST for first-time home buyers on new homes between $1 million and $1.5 million.
“The removal of the GST for first-time home buyers, which is currently before Parliament as part of Bill C-4, helps bring down the costs of a newly built home—immediately making the goal of home ownership a reality for more Canadians, especially young families,” the budget report states.
The Residential Construction Industry of Ontario (RESCON) is praising the move as steep taxes, charges, and levies are severely hindering the sector. The province has also promised to do the same. Combined, the cuts will reduce the cost of a new home for first-time buyers by 13%. For a $1-million property, that translates into savings of $130,000.
“The tax burden on new housing is one of the critical factors that are stymieing new construction and driving up costs,” said RESCON president Richard Lyall. “Presently, the tax burden accounts for 36 per cent of the cost of a new home. The best way to improve housing affordability is to prioritize lowering costs via reducing the tax burden. Cutting the sales tax should help move the needle.”
RESCON said that its also looking forward to working with the federal government on the Build Canada Homes initiative, and that putting billions of dollars into infrastructure and creating careers in construction are key to getting more new homes built.
“It is critical that we get this right as the housing situation in Ontario is grim just now,” added Lyall. “We are in the worst housing crisis in a generation, and bold action is necessary.”
