Removing the HST taxes on rental homes is touted as a benefit - for who? Will it reduce the monthly rent for tenants?

By Staff

November 1st, 2023

BURLINGTON, ON

The provincial government shovels out about ten, sometimes more, announcements each day telling the public about a long term care home that is going to be built in Pefferlaw or about money being spent to improve internet service in rural Oxford County.

The removal of HST will apply to new purpose-built rental housing, such as apartment buildings, student housing and senior residences built specifically for long-term rental accommodation. The legislative reform is part of the federal and provincial government’s response to the ever-rising cost of residential housing in Canada and the corresponding lack of available affordable housing.

An announcement today on the plans to remove the full eight per cent provincial portion of the Harmonized Sales Tax (HST) on qualifying new purpose-built rental housing in order to get more rental homes built across the province is significant.

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.

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

Currently, the Ontario HST New Residential Rental Property Rebate is equal to 75 per cent of the provincial portion of the HST paid, up to a maximum rebate of $24,000. The enhanced rebate would be equal to 100 per cent 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.

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 per cent of residential units designated for long-term rental.

Some questions do come to mind.
Where will the savings be realized? At the developer level or at the tenant level.

And if at the developer level is there any oversight to ensure that the benefit is actually realized by the tenant.

We will do what we can to follow up on this.