On housing, taxation, bureaucracy and Canada’s increasingly complicated relationship with the family home.
There was a time when buying a house was a relatively straightforward proposition. You found one you liked, arranged a mortgage, moved in and spent the next 25 years paying it off. Along the way, you might renovate the kitchen, add a bathroom or build an extension. If you were fortunate, the house appreciated in value, and one day you sold it, downsized and enjoyed the proceeds.
Today, a house is apparently expected to perform several additional functions. It must provide shelter, finance retirement, support the municipal budget, stimulate economic growth, provide affordable accommodation for future generations and, preferably, save the Canadian economy.
That’s quite a lot to ask of a three-bedroom semi with a questionable basement.
I’ve spent much of my professional life designing, building, buying, investing in and selling real estate. As an architect, builder, investor and broker, I’ve experienced the housing market from just about every angle, including the occasional rather expensive one.
And lately, I’ve been wondering: if everyone agrees that housing is too expensive, why do we continue making the business of producing and owning it more expensive?
A house, two land transfer taxes and a rather expensive welcome mat
Toronto introduced its municipal land transfer tax in 2008, during David Miller’s administration, in addition to the existing Ontario land transfer tax. Under Mayor Olivia Chow, additional graduated rates were introduced on higher-priced residential properties in 2024, with further increases in April 2026.
Apparently, one government charging you for buying a house wasn’t quite enough.
Consider a builder purchasing an older Toronto property for $4 million, intending to demolish it and construct a new home. The combined provincial and municipal land transfer taxes now amount to around $200,000.
That’s all before a single drawing has been prepared, a permit issued or a contractor has arrived on site. And the architect hasn’t even sent his first invoice.
That money becomes part of the project’s acquisition cost, alongside financing, construction, professional fees and the considerable carrying costs incurred while the property is being redeveloped. Yet the eventual selling price is determined by the market, not by how much the builder has spent. Higher acquisition costs can reduce the price a builder is willing to pay for the original property, narrow the profit margin or make the project financially unattractive altogether.
And when fewer projects make financial sense, fewer projects get built.
Meanwhile, Toronto’s 2026 budget anticipates collecting $850 million in municipal land transfer tax revenue, approximately $789 million of which supports operating expenses. The city has become rather attached to the housing market, even as it attempts to make housing more affordable.
The tax also discourages people from moving. A couple considering selling their large family home and purchasing a smaller condominium may discover that the transaction costs make staying put considerably more attractive. The four-bedroom house remains occupied by two people, while a growing family continues searching for somewhere larger to live.
The city needs revenue, of course. But there is something peculiar about relying on a tax generated by housing transactions while simultaneously trying to make housing more accessible. Particularly when the housing market slows and those transactions begin disappearing.
The city’s bills, inconveniently, do not disappear with them.
Explore the Toronto real estate market with these posts next:
- They Don’t Build Them Like They Used To: Pros and Cons of Modern Homes
- When is the Best Time to Sell Your Home: Selling Now Vs. Waiting
- The Ultimate Guide to House Hunting in Toronto
Property taxes, permits and the joy of dealing with City Hall
Property taxes are another annual reminder that buying a home doesn’t necessarily mean you’ve finished paying for the privilege of owning it.
Toronto’s residential property tax increases have been substantial in recent years, adding to rising insurance premiums, utility costs, maintenance expenses and mortgage payments. For landlords, those costs become part of the economics of providing rental accommodation.
A landlord may want to increase the rent to recover higher expenses, but rent-control legislation and market conditions limit what can actually be charged. When carrying costs exceed rental income, the owner must absorb the shortfall, sell the property or hope that future appreciation eventually makes the investment worthwhile.
There is nothing inherently wrong with investments carrying financial risk. Property owners should not expect guaranteed profits. But private rental housing is part of our housing supply, and the financial circumstances of those who provide it matter.
All of which brings me to another question. Before introducing additional taxes, how thoroughly are we examining the cost and efficiency of providing municipal services?
Having designed and built numerous houses over the years, I’ve spent a considerable amount of time dealing with Toronto’s building department. Some experiences have been perfectly pleasant. Others have made me question whether I was actually dealing with the same municipality.
I recall arriving at City Hall with a set of architectural drawings for a building permit application. The woman at the plan-examining desk took one look at them and became thoroughly annoyed because they had been prepared at a scale for which she didn’t have the appropriate architectural ruler. Her solution? Have the drawings redone at a different scale.
There was no prescribed requirement that they be submitted at her preferred scale, and the drawings were perfectly suitable for examination. Apparently, the absence of the appropriate ruler had become my problem.
I looked at her with what I imagine were rather piercing eyes, while internally contemplating the prospect of throwing myself onto the floor, kicking and screaming like a small child who had just been denied a second ice cream.
An adult architect having a full-blown tantrum at the City Hall building department. I suspect it would have made an excellent photograph.
Instead, I somehow maintained my composure, and after a brief review, she accepted the drawings and passed them along for examination. One can only imagine the cost of having an entire set of architectural drawings revised because somebody couldn’t find the right ruler.
The problem isn’t that municipal employees should be expected to work without proper compensation, benefits or pensions. They provide essential services, and many do their jobs extremely well. But large public organizations can develop layers of procedure, staffing arrangements and administrative habits that are difficult to change, particularly when collective agreements and existing obligations limit flexibility.
That makes independent operational reviews, sensible staffing decisions, improved technology and measurable service standards all the more important. If a building permit takes months to process, how much of that time is genuinely required for a thorough examination, and how much is consumed by the system surrounding it?
And how much does that delay cost the person trying to build the house?
For condo owners, there’s another cost in the form of condo fees. But where do your fees really go? Learn more about the unsung workhorse of reserve funds.
First the city. Then the bank. Then perhaps a small nervous breakdown.
The permit application is only part of the adventure.
For my own building projects, I generally enjoyed the design process and working with my drafting people to prepare the drawings. Developing the budget was another essential part of the exercise, and one I was perfectly comfortable undertaking. What I dreaded was approaching the bank for financing.
The bureaucracy, the time required to review everything and the seemingly endless requests for additional information could make the experience feel rather like being subjected to an airport strip search.
The bank wanted to know every detail of the project, every dollar I had, where it came from, where it was going, what other assets I owned and what financial obligations I might have. By the end of the exercise, I half expected someone to ask whom I had driven to school that morning and whether they had brought their lunch.
Of course, lenders have legitimate reasons for examining a borrower’s financial circumstances and the viability of a construction project. They’re advancing substantial sums of money, and the risks need to be understood. But anyone who has undertaken a development knows how quickly additional requests, reviews and delays can compound.
Every month spent waiting for an approval is another month of financing costs, insurance, property taxes and other carrying expenses. The land continues sitting there, contributing very little to society beyond providing an exceptionally expensive home for a few weeds.
And then there is the curious imbalance between the ease with which governments collect money and the effort sometimes required to get any of it back.
Potholes, anyone?
When municipal infrastructure damages your vehicle, the process of making a claim can be sufficiently involved that some people decide the time and aggravation simply aren’t worth it. Even when a claim is legitimate, establishing liability and obtaining reimbursement can take considerable effort.
I know.
Imagine if paying your property taxes involved the same degree of paperwork, documentation, follow-up and uncertainty. I suspect the city would develop a remarkably efficient new system by Thursday.
Join me on a retrospective through one of my most notable projects, building a home for my young family in the 1990s:
- The House That Changed Everything – Act 1
- The House That Changed Everything – Act 2
- The House That Changed Everything – Act 3
Canada’s housing problem is bigger than Toronto
All of this feeds into a much larger Canadian dilemma.
For decades, homeownership has been one of the principal ways Canadians have accumulated personal wealth. Many have benefited from substantial appreciation, while younger generations now face the challenge of purchasing homes at prices that bear an increasingly difficult relationship to household incomes.
At the same time, housing has become an important source of economic activity and government revenue. Construction, real estate, finance, architecture, engineering, legal services and countless associated businesses all depend on a functioning housing market.
We want existing homeowners to retain their equity, first-time buyers to find affordable homes, investors to provide rental accommodation, builders to produce more housing and governments to collect enough revenue to provide the infrastructure and services that communities require.
We apparently want all of these things simultaneously, preferably without anyone having to pay for them.
The difficulty is that these objectives don’t always align. Higher development charges can help finance municipal infrastructure while making new housing more expensive to produce. Higher property taxes support public services while increasing the cost of owning and operating property. Falling home prices can improve affordability for prospective purchasers while reducing the equity of existing homeowners. And policies intended to discourage speculative investment may also affect the financing of new construction.
The problem is particularly apparent in Toronto’s condominium market. Only 156 condominium units began construction in the city during the first half of 2026, according to CMHC. While purpose-built rental development has become a more significant contributor to housing supply, the weakness in new ownership housing construction raises questions about what will be available several years from now.
Today’s construction slowdown can become tomorrow’s shortage of completed homes.
We need to consider not only the housing being completed today, much of which was financed and started years ago, but also the projects that are financially viable enough to begin construction now.
A builder cannot construct a house or condominium building simply because a government has declared that more housing is needed. Land, financing, construction, municipal fees, infrastructure and professional services all have to be paid for, and the finished product must generate sufficient revenue to support those costs.
Federal housing programs, provincial planning policies and municipal taxation all influence that equation. So do interest rates, household incomes and the availability of investment capital. There is no single policy adjustment that will solve the problem.
Nor can governments simply eliminate every fee associated with development without finding another way to pay for the roads, water systems, sewers and other infrastructure that new housing requires.
There is no magical source of public funding that doesn’t ultimately come from somebody.
Although, judging by the number of taxes associated with a Toronto property transaction, we do appear to be conducting a fairly comprehensive search.
How does Toronto compare on the international stage? Read these posts for more:
- Toronto, World Class, Whatever That Means
- The Best Neighbourhoods in Toronto – and Their Iconic Global Counterparts
- Two Weeks, Three Cities and The Architecture of Feeling
What happens next?
For homeowners, slower appreciation may mean reconsidering the assumption that a house will automatically provide an ever-increasing retirement fund. For investors, rental income and operating expenses may become more important than the expectation that property values will rise indefinitely.
For builders, the viability of new projects will depend on the relationship between land prices, construction expenses, financing costs, municipal requirements and what purchasers or tenants can actually afford. And for municipalities, weaker property transactions and reduced development activity may put additional pressure on budgets that have become dependent on housing-related revenue.
None of these outcomes is inevitable. But they are interconnected, and decisions made today can have consequences that extend well beyond the next municipal or federal election.
What I’d like to see is a more comprehensive examination of how the costs of creating and owning housing are affected by government policy, alongside a serious effort to improve the efficiency of the public services that those taxes finance.
That means measuring results rather than simply announcing programs, collecting additional revenue or promising that everything will somehow become more affordable.
As an architect, I’ve always loved houses. Not simply as investments or entries on a municipal tax roll, but as places where people live, raise families, entertain friends and create memories. A well-designed home can improve the quality of everyday life in ways that are difficult to quantify on a spreadsheet. It can also represent an enormous financial commitment, and those two realities need to coexist.
A house should be somewhere to live, perhaps raise a family, entertain a few friends and occasionally wonder why the plumber hasn’t arrived.
It shouldn’t have to carry the entire Canadian economy on its shoulders.
Particularly when we’ve already charged it twice just to change hands.
Thinking about buying or selling in Toronto? I’d love to connect. Get in touch today by filling out the form on this page, or by calling/emailing me directly.
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