The winds of change are blowing through Ontario’s real estate landscape as the government takes a decisive step to boost affordability. On November 1, a groundbreaking announcement declared the removal of the full provincial Harmonized Sales Tax (HST) for certain new rental developments. This move is poised to impact the rental housing market significantly, especially for purpose-built projects like apartment buildings, student housing, and senior residences.
A Beacon of Hope Amidst Affordability Concerns
What’s Changing?
The enhanced rebate is not a one-size-fits-all solution; it comes with specific criteria. To qualify, projects must commence construction between September 14, 2023, and December 31, 2030, completing construction by December 31, 2035. The qualifying buildings should have at least four private apartment units or 10 private rooms/suites, with a remarkable 90% of residential units designated for long-term rental.
Ontario’s Commitment to Affordability
This recent announcement is part of a broader effort by Ontario to enhance affordability, building on the Housing Action Plan unveiled in 2022. It’s not a standalone measure but a crucial piece in a puzzle aimed at making living in Ontario more accessible.
Ontario already offers a New Residential Property Rebate, but it covers only 75% of the provincial HST, capped at $24,000. The proposed rebate, however, is a game-changer, encompassing the entire provincial HST with no maximum limit.
Crunching the Numbers: What It Means for Developers
Imagine a two-bedroom rental unit valued at $500,000. Under the new rebate, this unit could benefit from a provincial tax rebate of a whopping $40,000. Couple that with the federal rebate from the recent Affordability and Housing Act, reaching up to $25,000, and developers in Ontario stand to gain up to $65,000 in tax rebates. It’s not just a financial boon for developers; it’s a potential catalyst for a surge in affordable rental units.
Addressing Existing Renters’ Concerns
A Glimmer of Relief
To alleviate pressure on existing renters, Ontario has also taken steps to cap annual rent increases below the inflation rate. However, this applies only to units built before November 2018. Even in older units, landlords can increase rent significantly for the first year if a tenant moves out, creating a hurdle for new renters, especially those arriving from overseas.
The Immigrant Perspective
Aiming for a Welcoming Ontario
Ontario’s government envisions this rebate as a magnet for developers to construct more affordable rental units, and for good reason. Census 2021 data reveals that almost half (46.6%) of Toronto’s population, Canada’s largest city, consists of immigrants. The rebate aligns with the goal of making Ontario an attractive settlement option for newcomers.
A Supply and Demand Conundrum
Despite the province’s appeal, there’s a stark reality: the demand for housing in Ontario, particularly in cities like Toronto, outpaces the current supply. A report by Desjardins highlights the looming risk that insufficient housing supply poses to Ontario’s economy. The rebate, by encouraging more construction, could help bridge this gap.
The National Landscape
Canada’s Growing Population
Beyond Ontario’s borders, Canada is experiencing remarkable population growth, reaching 40 million people this year. The Immigration Levels Plan for 2024-2026 outlines ambitious targets, with Canada set to admit 500,000 new permanent residents in both 2025 and 2026. This surge in population necessitates a comprehensive approach, including aligning immigration policies with housing infrastructure.
Strategic Immigration: A Key Component
The Immigration Refugees and Citizenship Canada (IRCC) Strategic Immigration Report emphasizes the need for a cohesive strategy. This includes consultations with stakeholders to align immigration numbers with existing infrastructure, addressing the housing challenge. The report also hints at potential pathways for newcomers with construction experience, accelerating the construction of much-needed housing.
FAQs
Who benefits from the full HST removal in Ontario?
- The rebate primarily benefits developers of new purpose-built rental housing meeting specific criteria.
What is the timeline for qualifying projects?
- Construction must start between September 14, 2023, and December 31, 2030, with completion by December 31, 2035.
How does the new rebate differ from the existing one?
- The existing rebate covers 75% of provincial HST, up to $24,000, while the new one covers the full provincial HST with no maximum amount.
Is there relief for existing renters in Ontario?
- Yes, Ontario has capped annual rent increases below inflation, though it applies only to units built before November 2018.
How does Ontario plan to address the housing supply-demand gap?
- The removal of the full HST aims to incentivize developers to build more affordable rental units, addressing the housing shortage in the province.
