The residential construction industry is facing its most challenging environment ever due to a perfect storm of stifling taxation, rising material costs, unpredictable market forces like tariffs, and myriad other issues.Cumbersome planning approvals processes and restrictive regulatory policies are also delaying new home construction and significantly adding to the cost, so much so that building has stalled because it’s near impossible for working folks to afford a home close to where they work.The challenges facing the residential sector – and consumers – have been years in the making. The core of the problem is the long-evolving process of government policies, taxes, fees and levies and regulatory processes that are so restrictive and bureaucratic in nature that they have effectively stalled the housing sector at a time when homebuilding is most needed.The federal government has a budget coming up soon and can correct course by taking steps to drive financial initiatives and housing policy that will work to implement solutions to the crisis. The feds are in a unique position to influence both provincial governments and municipalities and encourage them to eliminate impediments and adopt solutions to getting homes built.Sales and Starts Are FallingSwift action is necessary. Sales and starts have fallen off a cliff and job losses in the industry are mounting. We need to build between 430,000 and 480,000 homes each year over the next decade across Canada to restore affordability to the market but are falling short. Only 245,360 units were started in 2024. Between 2011 and 2021, an average of 204,000 units were built annually.Twenty years ago, the housing cost to income ratio in Canada was 4:1. It is now 7:1 and over 9:1 in Ontario.Reports indicate that if significant public sector action is not taken to support the industry and reverse the ever-increasing job losses, Ontario will likely see a reduction in GDP by as much as 1.5 to 2.5 per cent.Taxes Must Be ReducedTo reverse this trend, the feds must first tackle the excessive taxation on new housing as it accounts for 36 per cent of the cost of a new home. The government can extend its reach into provincial and municipal jurisdictions to reduce their taxation levels and improve approval processes.For example, the feds took a positive step by scrapping the GST on new homes up to $1 million for first-time buyers and reducing the sales tax for first-time buyers on a sliding scale for homes purchased between $1 and $1.5 million. The rebate should now be extended to all new home sales.The feds must also collaborate with the Ontario government to ensure that the provincial HST be rebated to all first-time homebuyers with the aim of a full expansion to all new home purchasers.Municipal development charges should be reduced to 2015 levels. The federal government can facilitate that happening by ensuring municipalities have proper funding for infrastructure. Other Measures NeededTo encourage faster construction of new homes, the feds should also, as reflected in proposals for Build Canada Homes, extensively support offsite and innovative homebuilders. Digitization of the planning approvals process is also necessary as lag times still present considerable challenges. Our timelines are among the slowest in the world. It is not unusual for homebuilders to experience multi-year delays before getting shovels in the ground on projects.The feds also need to further adopt current and emerging technologies associated with PropTech and ConTech, as they have the potential to significantly move the needle on new housing.A slew of other measures is also recommended, such as restoring the Multiple Unit Residential Building Program and Limited Dividend Company Model, and lowering the stress test threshold to permit more new home buyers to qualify for financing. Some of the restrictions on foreign buyers also need to be lifted and the government needs to engage more fully with private market homebuilders, especially where the housing crisis is most acute.Homebuilders across the country know how to build homes. The upcoming federal budget is an opportunity to work with the industry to reach the housing goals. It’s in everybody’s best interest.