In an effort to build more rental housing, the Government of Ontario plans to remove the full provincial portion of the Harmonized Sales Tax (HST) on new purpose-built rentals.
The 8% tax will no longer be applied to new purpose-built rental housing, including apartment buildings, student housing, and senior residences built specifically for long-term rental accommodation, that meet certain criteria.
Projects must begin construction between September 14, 2023, and December 31, 2030, and be completed by December 31, 2035 in order to qualify for the full HST rebate. Buildings must have at least four private apartment units or 10 private rooms or suites, and at least 90% of the units must be designated for long-term rental.
"Our government will continue to take action and work together with our partners at all levels of government to help increase the supply of affordable homes across this province," said Paul Calandra, the Minister of Municipal Affairs and Housing.
"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."
The federal government eliminated GST on new purpose-built rentals in September; together, the cuts will remove the full 13% HST from qualifying new builds in Ontario.
Currently, the Ontario HST New Residential Rental Property Rebate is equal to 75% of the provincial portion of the HST paid, up to a maximum rebate of $24,000. With the enhancement, the rebate will be equal to 100% of the provincial portion of the HST, with no maximum rebate amount.
For example, under the enhanced rebate, a two-bedroom rental unit valued at $500,000 will receive $40,000 in provincial tax relief and a further $25,000 in federal tax relief.
The move was applauded by industry leaders, including Dave Depencier, President of the Ontario Home Builders’ Association, and Tony Irwin, the President and CEO of the Federation of Rental-housing Providers of Ontario and the Interim President of the Canadian Federation of Apartment Association, who noted it will get more "desperately needed" rental homes built faster.
"Today’s 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," said Jason Burggraaf, the Executive Director of the Greater Ottawa Home Builders’ Association.
"That means more opportunity, choice, and affordability in homes for residents across the province."