Ontario plans to cut its portion of HST for new rental homes

Officials say more details will be revealed in the coming days.

Ontario Finance Minister Peter Bethlenfalvy announces tax cuts for rental home construction. – Government of Ontario

Key Takeaways:

Ontario plans to remove the 8% provincial portion of HST for purpose-built rental home construction.
Combined with federal cuts, this removes the full 13% HST on qualifying new purpose-built rental housing in Ontario.
Ontario is also investigating how to leverage modular construction to meet its goal of building 1.5 million homes by 2031.

The Whole Story:

Ontario plans to cut taxes for construction to get more rental homes built.

The province announced it is taking steps to remove the full 8% provincial portion of the Harmonized Sales Tax (HST) on qualifying new purpose-built rental housing to encourage rental home construction.

“There has never been a greater need to get rental housing built across the province. This is why our government is taking steps to tackle the housing crisis so that all Ontarians can have an affordable place to live,” said Peter Bethlenfalvy, minister of finance. “Tomorrow, I will provide an update on our plan that will continue with our government’s targeted, responsible approach so we have the flexibility needed to build Ontario and address the uncertainty of today while laying a strong fiscal foundation for future generations.”

Cutting taxes

The removal of the provincial portion of the HST would apply to new purpose-built rental housing such as apartment buildings, student housing and senior residences built specifically for long-term rental accommodation that meet the criteria. The enhanced rebate would apply to qualifying projects that begin construction between September 14, 2023 and December 31, 2030, and complete construction by December 31, 2035.

To qualify for the enhanced HST New Residential Rental Property Rebate, new residential units must be in buildings with at least four private apartment units or 10 private rooms or suites, and have at least 90% of residential units designated for long-term rental.

Ontario government officials meet with construction workers during the tax cut announcement. – Government of 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. The enhanced rebate would be equal to 100% of the provincial portion of the HST, with no maximum rebate amount.

In the example of a two-bedroom rental unit valued at $500,000, the enhanced Ontario HST New Residential Rental Property Rebate would deliver $40,000 in provincial tax relief. When combined with the enhanced federal GST New Residential Rental Property Rebate, this would amount to $65,000 in tax relief.

Since fall 2022, Ontario has called on the federal government to remove the HST for certain purpose-built rental housing. In September, Ottawa announced it would totally remove GST for purpose-built rental housing projects. Trudeau then encouraged provinces to do the same.

Together, the provincial and federal actions would remove the full 13% HST on qualifying new purpose-built rental housing in Ontario.

Developing a modular strategy

The province is also working on the development of a comprehensive modular home strategy. This strategy includes exploring the use of a Request for Qualification process that will identify and pre-qualify companies that contribute to modular housing construction on the scale that can help meet housing goals.

The government is also working to leverage surplus provincial lands and partnering with municipalities to leverage surplus municipal lands in order to help reduce the cost of building attainable homes, including modular homes.