A recent study conducted by Ipsos Reid revealed that home owners rated the ‘freedom to do what they want’ with their home as the second biggest benefit to home ownership, right behind ‘building equity’ and just ahead of ‘stability. It is no surprise then that home renovations undertaken by Ontario’s 3.2 million home owners produced over $20.3 billion in economic activity last year. Unfortunately, a large amount of home renovation work in this province is conducted visa-vi the ‘cash deal’ or through the underground economy.
According to housing experts at Altus Group , 37 per cent or $5.2 billion of the output from the provincial home renovation industry in 2010 was conducted through the underground economy.
Unscrupulous workers hurt the reputations and competitiveness of legitimate renovation contractors and cheat governments out of billions of dollars. Ontario Home Builders Association (OHBA) estimates that the underground home renovation economy causes the loss of up to $298 million in HST revenue annually, $1.6 billion in income tax revenue annually and $767 million in other revenues such as CPP, WSIB, Employer Health Tax and Employment Insurance Premiums.
In addition, the underground home renovation industry poses a number of serious risks to home owners. Underground contractors often do not meet health and safety standards, carry no liability insurance and do not offer warranties. Moreover, home owners have little to no recourse in the vent of shoddy or unsafe workmanship.
Ontario REALTORS® and home builders believe that the best way to mitigate the growth of the underground home renovation economy is to give home owners a financial incentive to use professional contractors. Professional contractors have HST numbers, maintain insurance and pay taxes.
Specifically, Ontario REALTORS® are urging all candidates running in the 2011 Ontario election to support the creation of a permanent Ontario Home Renovation Tax Rebate. If the provincial government were to institute a renovation rebate, payable to the homeowner, homeowners would be far more likely to insist on a receipt creating a paper trail that would deter underground economic activity.
The payment to the homeowner provides the incentive for written contracts which is good for everybody, particularly governments losing billions to the underground economy.
Source: OREA homeownershipmatters.ca
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