One of the government’s latest actions to support more affordable housing is the elimination of the GST on the construction of new rental apartments. According to the official website of the Government of Canada, the goods and services tax (GST) is a tax that you pay on most goods and services sold or provided in Canada. In Ontario and other provinces, the GST has been blended with the provincial sales tax, called the harmonized sales tax (HST).
At the recent Liberal caucus retreat in London, Ontario, the current government has said that they are currently working on measures to bring down the cost of living and ease the current housing crisis. One of the measures is to remove the GST, which will apply to new purpose-built rental housing.
The Department of Finance Canada communicated that this measure will apply to apartment buildings, student housing, and senior residences built specifically for long-term rental accommodation. Projects that convert existing non-residential real estate, such as an office building, into a residential complex would be eligible for the enhanced GST Rental Rebate if they meet certain conditions.
The enhanced GST Rental Rebate will apply to projects that begin construction on or after September 14, 2023, and on or before December 31, 2030, and complete construction by December 31, 2035. Cahdco projects may be eligible for a full rebate if they haven’t started construction yet. The Province of Ontario has also announced that they will waive GST on rental construction.
Affordable housing projects face several challenges, such as high-interest rates, construction costs, and reduced funding. The removal of the GST is an immediate relief to the project’s budgets and will improve their financial viability.
Non-profits, co-ops & charities that develop affordable housing previously received an HST discount ranging between 65-80% of HST. The recent announcements will save the remaining HST.
To get a sense of $ savings, a Cahdco project that costs $20 Million, before HST, would previously pay $780,000 (30%) on HST, but with the removal of HST, our projects will be saving 100% after the rebate.