With their fall economic statement last week, the Province of Ontario announced the elimination of provincial sales tax (PST) on the construction of new rental apartment buildings. This announcement matches the earlier federal government announcement to remove the goods and services tax (GST). Now in the Province of Ontario, there is a 100% elimination of harmonized sale tax (HST) on the construction of apartment buildings. There is no maximum rebate amount.
Eliminating or reducing tax disincentives to housing growth is a recommendation in the Province of Ontario Housing Affordability Task Force report.
The Ontario Ministry of Finance 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 HST waiver if they meet certain conditions. In general, projects must have a minimum of four apartments or 10 private rooms or suites and have at least 90% designated for long-term rental.
The enhanced HST 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 will be eligible for a full rebate if they haven’t started construction yet.
Affordable housing projects face several challenges, such as high interest rates, construction costs, and reduced funding. The removal of the HST is an immediate relief to the project’s budgets and will improve its 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 the size 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.