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Ontario is removing HST on new Purpose-Built Rentals

In a landmark move, the Ontario government is eliminating its 8% provincial portion of the Harmonized Sales Tax (HST) on new purpose-built rentals. The decision is being hailed as an initiative to encourage more construction of rental housing in the region, marking an essential step towards addressing the housing crisis plaguing the province.

This tax exemption targets new purpose-built rental projects, including apartments, student housing, and long-term senior residences that satisfy certain requirements. To qualify, construction must commence between September 14, 2023, and December 31, 2030, and reach completion before December 31, 2035. Furthermore, the edifices must feature a minimum of four private apartments or 10 private rooms or suites, with at least 90% of the units reserved for long-term rentals.

Previously, the Ontario HST New Residential Rental Property Rebate offered a return of 75% of the provincial portion of the HST paid, capping the maximum rebate at $24,000. With this historic amendment, the rebate now equals 100% of the provincial share of the HST, without a maximum rebate constraint.

Illustratively, under the enhanced rebate, a two-bedroom rental unit valued at $500,000 will witness an influx of $40,000 in provincial tax relief, further complemented by $25,000 in federal tax relief. This aligns with the federal government’s strategic move in September to abolish GST on new purpose-built rentals, bringing both together to nullify the entire 13% HST on eligible new constructions in Ontario.

This is a significant step that builds on the comprehensive measures in our government’s Housing Supply Action Plans to get shovels in the ground faster and help more Ontarians find a home that meets their needs and budget,” announced Paul Calandra, Ontario’s Minister of Municipal Affairs and Housing, amplifying the government’s commitment to affordable housing.

The announcement has prompted praise from various quarters of the real estate industry. Dave Depencier, President of the Ontario Home Builders’ Association, and Tony Irwin, the President of the Federation of Rental-housing Providers of Ontario, noted that the decision will expedite the construction of much-needed rental homes. 

“This announcement of removing the provincial portion of the HST on purpose-built rental will make many rental construction projects, which have always been expensive and face tough economic circumstances, viable,” shared Jason Burggraaf, the Executive Director of the Greater Ottawa Home Builders’ Association.

The anticipation is wide-reaching, and the hope is palpable, with many looking forward to more affordable homes for Ontario’s residents. The ripple effects of this decision, aimed at mitigating housing challenges and stimulating rental property developments, are eagerly anticipated across the region.