Federal infrastructure funding shortfall limits growth prospects, new study finds


The federal government is underfunding municipalities and public infrastructure, while reaping the greatest proportion of tax dollars from high-tax policies on homebuilding, a new economic analysis concludes.

Also, the federal government has the “greatest capacity to close the gap to the best practice recommendation of 4 per cent of GDP spending on public infrastructure.”

The research report, Will Feds Answer the Call? Infrastructure Investment Lags Amidst Highly Taxed Housing Construction was written by the Canadian Centre for Economic Analysis and commissioned by the Residential and Civil Construction Alliance of Ontario (RCCAO).

Findings include public infrastructure investment is 30 per cent under what economic analysis recommends, while production taxes on new housing construction are the highest of any sector.

“The high taxes on housing construction and underinvestment in public infrastructure is a problem the federal government is uniquely positioned to resolve,” said Nadia Todorova, RCCAO executive director. “Ontario cannot realize economic and immigration growth goals without the support of the federal government increasing funding for public infrastructure.”

Following the report, the RCCAO is calling on the federal government to increase public infrastructure funding and provide long-term, sustainable funding to municipalities to enable greater investment and planning in public infrastructure development and maintenance.

Also, the government should continue expanding immigration programs that welcome skilled construction workers to Canada to address infrastructure and housing labour force challenges.

Key report findings:

  • Tax burden on new home construction is two times higher compared to the rest of the economy.
  • The federal government’s share of new home construction taxes is 39 per cent, but only 7.1% in public infrastructure.
  • Without immigration, Ontario’s dependency ratio would grow to 70.7 per cent by 2050, roughly where Japan is currently. A high dependency ratio means that there are fewer people of working age to support a dependent population, like children and seniors.
  • The total purchase price of a home in Ontario includes at least 30.7 per cent of taxation revenues.
  • Federal government receives 39 cents of every $1 of tax revenue generated from the construction of a new home in Ontario, yet it only pays seven cents of every dollar invested in public infrastructure in Ontario.

Todorova says RCCAO will continue to work with all three levels of government, representing industry’s voice at the table and advocating for action to build the best future possible for Ontario.


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