On paper, it sounds like a historic win for Ontario homebuyers. Prime Minister Mark Carney and Premier Doug Ford stood together in Toronto on March 30 and announced a joint federal-provincial package that will reduce "taxes and fees for a home in Ontario by up to $200,000." The HST on new homes — all 13% of it — is being removed for one year on homes up to $1 million. Development charges are being cut in half for three years, with $8.8 billion in public money offsetting the difference to municipalities. The headlines write themselves.
But strip away the press conference optics and something uncomfortable emerges: this policy looks less like a housing affordability measure and more like a carefully disguised subsidy transfer from taxpayers to developers — one that happens to also generate favorable headlines for two politicians who both needed a win.
Here's why that framing matters, who actually benefits, and what it means for housing prices in the year ahead.
The Economics of an HST "Holiday"
Let's start with the headline measure: the full 13% HST removal on new homes up to $1 million for one year, saving buyers up to $130,000. The government presents this as the buyer keeping $130,000 that would otherwise go to taxes. The reality is more complicated — and it's the complication that developers understand better than almost anyone.
When you remove a tax that buyers were previously paying, rational actors in a competitive market adjust prices accordingly. Developers, sitting in a country with a chronic undersupply of housing, have very limited reason to keep their prices unchanged while the government writes them a $130,000-per-unit check. The economically literate move is simple: raise the listed price of new homes by roughly $130,000 during the window, pocket the HST relief that buyers would have paid, and call it margin improvement.
"There's no such thing as a free tax cut. When you remove HST from a new home, you're not giving $130,000 to the buyer. You're giving it to whoever sets the price — and that's not the buyer."
Buyers may feel better because their nominal purchase price looks the same or only slightly higher, and the HST line on the paperwork disappears. But they've effectively paid the same net price they would have paid anyway. The developer, not the buyer, keeps the difference. This is well-documented in academic literature on tax incidence in property markets — the party with the most market power captures the benefit.
Development Charges: A Direct Developer Subsidy
The second pillar of the announcement is the $8.8 billion joint federal-provincial fund that cuts development charges in half for three years. This is where the developer bailout framing becomes harder to argue against.
Development charges — the fees municipalities levy on new construction to pay for infrastructure like roads, water pipes, and community facilities — can add $50,000 to $150,000 or more to the cost of a single unit in the Greater Toronto Area. These are upfront costs that developers have been complaining about for years as a barrier to new construction.
Now, the provincial and federal government are splitting the bill to halve those charges for three years, targeting municipalities covering 80% of Ontario's population. The municipalities get reimbursed for the lost revenue. Developers get dramatically lower upfront costs.
There is no mechanism in this announcement that forces developers to pass those savings on to buyers rather than simply improving their profit margins. The government is spending public money to lower developers' costs, then hoping — not requiring — that the savings flow to purchasers.
That's not a housing affordability policy. That's a developer profitability support program with a housing affordability label.
The Institutional Investor Advantage
Here's the part of the story that almost nobody in the political coverage is asking: who is actually buying new homes in Ontario right now, and who will be best positioned to exploit the HST window?
The data is uncomfortable. According to Statistics Canada, investors owned 65% of Toronto's condo stock as of 2024. Nearly two in five condominium apartments in the Toronto CMA — 38.9% — were investment properties. These aren't mom-and-pop landlords with a single rental unit. The market has been progressively consolidated into the hands of investors who treat housing as a financial instrument.
The pre-construction market — the exact segment this policy targets — has always been disproportionately accessed by investors and speculators. You need large deposits (typically 20% of the purchase price, locked in for years), access to financing that may not be confirmed until closing, and the financial resilience to survive a market downturn. Regular first-time buyers rarely have all three. Institutional investors and well-capitalized family offices do.
The HST window creates a very specific incentive: if you're an investor who can afford to close on a pre-construction unit during the window, you get a $130,000 credit that — in a market where developers are likely already raising prices — may flow directly into your return on investment. For a first-time buyer trying to scrape together a down payment, accessing that window requires surviving years of pre-construction market risk, not to mention finding a unit that hasn't already been purchased by an investor.
The policy doesn't discriminate between institutional and retail buyers. But it definitely advantages the party that has the capital, the patience, and the financial infrastructure to operate in the pre-construction market. That's not the person who's been renting and saving for a down payment.
The Toronto Pre-Construction Crisis: Context Nobody Mentions
The timing of this announcement would be comedic if it weren't so consequential. The Toronto pre-construction condo market is in deep trouble, and the federal and provincial governments are throwing fuel on a fire that already burned down the neighborhood.
According to CMHC data, 55% of pre-construction units in Toronto were unsold in the first quarter of 2025. That's not a soft market. That's a market in cardiac arrest. RBC Economics described the pre-construction condo segment as "frozen," with the market requiring a fundamental re-pricing before demand can recover.
Buyers who purchased pre-construction units at peak prices — many of them during the 2020–2022 frenzy when Toronto condo prices hit all-time highs — are now facing a brutal reckoning. Toronto condo prices have dropped approximately 25% from their 2022 peak. As CBC News reported, an estimated 28,000 pre-construction units are expected to complete in Toronto in 2026, and many of those buyers are discovering their units are now worth far less than what they agreed to pay years ago. Mortgage brokers are describing the situation as "the biggest, most problematic year."
About 10% of pre-sold new condos registered in 2025 were taken back by developers — a sign that buyers are walking away from deposits rather than close at prices above what the market will now bear. These are not the stories that get invited to press conferences with the Prime Minister.
The HST holiday arrives in this context. It may prop up developer cash flows at exactly the moment they're under the most pressure. It may encourage demand from investors who see a window of opportunity. But it doesn't fix the fundamental problem: too many units were built at prices that made sense in a zero-interest-rate world, and those prices have to come down before the market clears.
The Price Forecast: What the Models Say vs. What the Policy Actually Does
Here is what the professional forecasters were saying before the Carney-Ford announcement:
| Source | Ontario Price Forecast 2026 | Context |
|---|---|---|
| TD Economics | -4.0% | Previously forecast +0.6% — slashed due to tariff uncertainty |
| CREA | +2.8% (national avg) | Forecast before HST announcement |
| CREA 2027 | +2.3% (national avg) | ~$715K national average by 2027 |
| Ontario (prior to deal) | Weakest in Canada | TD description of provincial market |
The TD downgrade is particularly important: Ontario was originally forecast to eke out modest 0.6% growth in 2026. After tariff uncertainty, trade disruption fears, and a slowing economy, that flipped to an expected 4% decline. The province's housing market was described by TD's own analysts as the weakest in Canada.
Into this environment, the government just injected a one-year tax cut that expires March 31, 2027. What does economic theory predict will happen?
Short-term (April 2026 – March 2027): A surge of demand pulled forward into the HST window. Buyers who were planning to purchase in 2027 rush to close before the deadline. Developers, knowing buyers have a hard deadline, have less incentive to discount. Prices may tick up or hold firm during this window, even in a weak underlying market. This creates the appearance of a recovery — headline-friendly for Carney and Ford — without actually fixing the supply-demand imbalance.
Post-window (after March 2027): The artificial demand stimulus disappears. Buyers who moved forward to capture the HST credit have exhausted themselves. The underlying market is still dealing with 25% elevated prices relative to incomes, elevated interest rates, tariff uncertainty, and a construction sector that never fixed its cost problems. Prices could easily resume their downward trajectory — or worse, correct harder because the artificial support masked how weak the market really was.
The Winners and Losers
Let's be honest about who gains and who doesn't from this package:
- Developers — Lower development charges mean lower upfront costs and better margins. HST removal can be captured in higher prices. The $8.8B public fund means municipalities can't push back on charge reductions. Clear winners.
- Institutional investors and well-capitalized buyers — Best positioned to exploit the HST window, access pre-construction inventory, and wait out market volatility. They have the capital, the financing, and the time horizon.
- Municipalities — Get made whole by upper levels of government on lost development charge revenue. No skin in the game.
- Politicians (Carney and Ford) — Get a joint press conference, a headline-making announcement, and the optics of "doing something" on housing. Clear political win.
- Regular first-time buyers — May get some benefit if developers pass savings on. But the pre-construction market they can access is dominated by investors, and the window creates price pressure that may push net prices up even as HST comes off.
- Taxpayers — On the hook for $8.8 billion in developer charge subsidies, with no mechanism to ensure the benefit flows to buyers rather than developers' bottom lines.
What Would Actually Help
The measures announced don't touch any of the actual constraints on housing affordability in Ontario. Zoning reform that would allow the density needed to meaningfully increase supply. A reduction in the regulatory burden that adds years to the approval process for new construction. Addressing the skilled trades shortage that is constraining how many units can actually be built. Tackling the municipal political economy that gives existing homeowners effective veto power over new housing in their neighborhoods.
None of those are one-year tax holidays. None of them generate a headline that reads "up to $200,000 in savings." None of them require standing next to your political opponent in front of cameras to announce.
The Bottom Line
The Carney-Ford housing package is a politically skillful maneuver. It generates positive headlines for two leaders who each needed a win on the file they've been most criticized on. It funnels significant public money to a well-organized industry lobby in developers. It creates the appearance of action on housing affordability without materially changing the underlying dynamics that make Ontario housing so expensive.
The HST holiday may genuinely help some buyers who were already planning to purchase and who manage to close during the window. But the broader effect — raising pre-construction prices, subsidizing developer margins, favoring capital-rich investors over cash-strapped first-time buyers, and postponing rather than solving the market's real problems — is a predictable outcome of a policy designed to look good rather than work well.
The question worth asking is simple: if you were a developer sitting in a market where 55% of your pre-construction inventory was unsold and prices were falling, and the government offered you a $130,000-per-unit tax credit for every unit you sold in the next 12 months — would you lower your prices, or would you raise them?
Most developers would answer that honestly. The government probably already knows the answer too. They just decided the headline was worth more than the policy.