Canada is in the throes of a full-blown housing crisis, yet the federal government has nevertheless introduced a progressively punitive carbon tax that, by decade’s end, could decimate first-time homebuyers’ dreams of homeownership, according to housing experts.

The tax purports to curtail the country’s carbon dioxide emissions with a levy that grew from $50 per tonne in 2022 to $65/tonne this year, and which will surge to $170/tonne by 2030.

But as the number of Canadians experiencing financial precarity has swelled in recent years, the carbon tax will only serve to push homeownership further out of reach for an increasing number of Canadians as the decade progresses.

For first-time homebuyers already struggling to get a foot in the proverbial door, much less in one they own, the carbon tax is akin to having the door slammed shut in their face.

“It’s going to wipe out the first-time homebuyer. It’s going to truly wipe out the first-time buyer unless they get support from their parents,” said Scott McLellan, chief operating officer of Plaza Corp., a developer based in the Greater Toronto Area.

“Unless somebody helps backstop their purchase, it will price out first-time homebuyers without a question.”

In Toronto, nearly 30% of a condominium’s purchase price is a confection of development charges and other municipal taxes slapped on developers, which they ultimately recoup in their projects’ sticker prices.

McLellan says the carbon tax is, therefore unnecessary, and will render housing especially financially prohibitive by 2030.

“It’s a cost against the project, an added cost that gets lumped into the purchase price. It’s an added cost to the whole process,” he said.

Steve Saretsky, a Vancouver-based realtor and housing analyst, says well-intentioned or not, the carbon tax is short-sighted because, without having addressed the root causes of housing affordability woes, the government effectively introduced another barrier for aspirational homeowners.

“I think it sounds really good, feels good, everyone wants to help the environment, but it’s going to be more expensive to build,” Saretsky said of building homes with expensive nascent green technologies.

“You have to train [trades workers] to get up to that code, as well, and it comes with repercussions tat will make housing more expensive, so we have to figure out what our priorities are in the near term.

“I think for most people, it’s about getting into a home as opposed to environmental concerns.”

New-build homes are anywhere from 10-20% more expensive than resale housing.

That could be all the more daunting for homebuyers later this decade, considering the latest Canadian Real Estate Association data revealed the average national sale price of a home was $716,000 in April.

In Metro Vancouver and the Greater Toronto Area, the average prices were $1,188,000 and $1,196,101, respectively, in May.

Housing prices are influenced by key market fundamentals, primarily population growth or decline, which either drives or softens demand, and with Canada increasing its immigration quota to 500,000 per annum—on the heels of record entries since 2021—in addition to 300,000 to 400,000 annual permit workers, both new-build and resale homes prices are poised to surge.

That signifies the need for rapid housing creation, the supply of which hasn’t kept apace demand for years, and likely won’t, thereby putting upward pressure on home prices.

Saretsky says the obvious solution is to foster an environment conducive to expeditious housing creation, however, he points to MLI Select, a Canada Mortgage and Housing Corporation rental housing construction financing program that rewards applicants with a point system, that, like the carbon tax, misses the mark.

“If you hit a number of points, it gives you financing, so if you want a 50-year amortization you have to get 100 points. To do that, No.1 is to offer below-market rents, or No. 2 is to make it environmentally-friendly housing construction,” he said.

“Clearly they’re putting emphasis on the environment. Today housing should be about affordability. [They] should restructure the point system, in my personal opinion.”

“If we talk about affordability, if our sole focus was affordability, the conversation wouldn’t revolve around green housing.”

Despite environmental initiatives that, juxtaposed with system issues in the housing market, are counterintuitive to making housing more accessible for middle-class and low-income Canadians, there are creative solutions.

McLellan suggests eliminating the harmonized sales tax (HST) that homebuyers pay, and unlikely though that may seem, the revenue shortfall could be recovered by legislated incentives that spur more housing development.

“If all three levels are serious about addressing the cost of housing, as well as ensuring more housing is built, we’d have a larger tax base, so maybe one way for all three levels of government to invest in the housing market is to get rid the HST.”


  • Neil Sharma

    Neil is a Toronto-based journalist. Before his most recent stint as STOREYS' senior reporter, he was a regular contributor for the Toronto Star, Toronto Sun, National Post, Vice, Canadian Real Estate Wealth, where he also served as editor-in-chief, and several other publications.