Ontario’s Strategy for Affordable Living: HST Removal on Rental Builds

The Ontario government has announced a pivotal change aimed at addressing the rental housing shortage by eliminating the provincial portion of the Harmonized Sales Tax (HST) on new purpose-built rental housing. This decision comes as a relief to developers and future tenants, highlighting the province’s commitment to making affordable housing more accessible.

Finance Minister Peter Bethlenfalvy emphasized the urgency of this initiative as part of a broader plan to provide Ontarians with affordable living spaces. The tax relief will pertain to qualifying new rental accommodations such as apartment buildings, student housing, and senior residences designed for long-term occupancy. To be eligible, projects must start construction between September 14, 2023, and December 31, 2030, and be completed by the end of 2035.

In a collaborative effort to alleviate the housing crisis, the federal government is also being called upon to eliminate their share of the HST on such developments. Together, these measures would remove the full 13 percent tax from new qualifying rental housing, significantly reducing construction costs and incentivizing developers.

The announcement follows persistent advocacy from Ontario for federal support in this sector, a call that appears to have been heeded. The combined efforts at the provincial and federal levels signify a strategic push to encourage the supply of affordable housing.

Paul Calandra, Minister of Municipal Affairs and Housing, reiterated the importance of cooperation among all levels of government to spur the growth of affordable housing. This tax exemption is a critical component of Ontario’s extensive Housing Supply Action Plans, which aim to expedite the construction process and address the needs of Ontario’s residents.

Moreover, the province is proactively developing a comprehensive modular home strategy, part of which involves a Request for Qualification process to pre-qualify contributors to modular housing construction. The strategy also explores utilizing surplus provincial lands and collaborating with municipalities to use surplus municipal lands, which could further lower the costs of creating attainable homes.

Key takeaways include the fact that the current Ontario HST New Residential Rental Property Rebate will transition from 75 percent of the provincial HST to a complete 100 percent rebate with no cap. For example, a two-bedroom rental unit valued at $500,000 could see a $40,000 provincial tax relief, which would amount to a $65,000 tax relief when combined with federal incentives.

To be eligible for these benefits, new residential units must be part of larger developments that meet specified criteria for long-term rental accommodation. This move aligns with recommendations from the Housing Affordability Task Force report, which advocates for the reduction of tax barriers to encourage housing growth.

Associate Minister of Housing Rob Flack underscores the province’s commitment to attainable housing, suggesting that innovations like modular housing will lead to a new era of affordability. The government’s stance is clear: owning a home in Ontario should be an achievable dream for its residents, and the latest measures are a significant leap toward that goal.