On Sept. 14, 2023, Prime Minister Justin Trudeau announced that the federal government is removing Goods and Services Tax (GST) on new purpose-built rental housing in order to incentivize construction of much-needed rental homes for Canadians.
The removal of GST 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 government's response to the ever-rising cost of residential housing in Canada and the corresponding lack of available affordable housing, whether to own or rent.
The new rebate will be increased from 36 to 100 per cent, allowing for a full recovery of the five per cent federal GST (and the corresponding five per cent federal component of the HST). Importantly, the legislation will also remove the existing GST Rental Rebate phase-out thresholds for such purpose-built rental housing projects, which thresholds previously reduced and then eliminated the rebate for units with a fair market value of between $350,000 and $450,000.
The enhanced GST Rental Rebate will apply to projects that begin construction on or after Sept. 14, 2023, and on or before Dec. 31, 2030, and complete construction by Dec. 31, 2035. The enhanced GST Rental Rebate for purpose-built rental housing is immediately effective as of today, subject to the passage of implementing legislation.
Qualifying new residential units would be those that qualify for the existing GST Rental Rebate and are in buildings with at least:
- Four private apartment units (i.e., a unit with a private kitchen, bathroom and living areas), or at least 10 private rooms or suites (e.g., a 10-unit residence for students, seniors or people with disabilities); and,
- Ninety per cent of residential units designated for long-term rental.
The enhanced GST Rental Rebate is also being made available to projects that convert existing non-residential real estate into a residential complex, as well as to public service bodies, provided all other above conditions are met.
Individually-owned condominium units, single-unit housing, duplexes, triplexes, housing co-ops and owned houses situated on leased land and sites in residential trailer parks will not be eligible for the enhanced GST Rental Rebate. These types of residential housing units will continue to qualify for the existing GST Rental Rebate.
Provincial governments that have harmonized sales tax and incorporate a provincial rebate are being asked to take similar steps. Since the federal announcement, Ontario's Ministers of Finance and Municipal Affairs and Housing have expressed a desire to work with the federal government to remove the Ontario portion of the HST from similar purpose-built rental housing as soon as possible.
The Gowling WLG construction, real estate and commodity tax teams are paying close attention to new developments and policies from government to facility the economical growth of affordable housing. Please contact the authors or any member of Gowling WLG's Construction & Engineering Group, or subscribe to our Building Brief newsletter to stay informed.