Ontario shares details on plan to remove 8% tax on new purpose-built rental housing

Ontario provided more details Wednesday about how it plans to eliminate its portion of harmonized sales tax (HST) on new purpose-built rental housing.

The change was first promised in September, when the federal government announced its plans to waive the general sales tax on new rental developments. At the time, the province said it would work closely with Ottawa to cut its portion of taxes, which equal eight per cent.

Both proposals would bring the total tax cut for all new long-term rentals in Ontario up to 13 per cent.

While the changes still needs to be made through legislation, the province said Wednesday it would be retroactive to Sept. 14, when the prime minister made his announcement that changes were coming. The federal government has since introduced legislation that would remove GST changes.

The bill is set to be introduced with the fall statement on Thursday, the Ministry of Finance said. 

"By taking steps like this to address the housing crisis, we're ensuring Ontario is the best place to live, work and raise a family," said Finance Minister Peter Bethlenfalvy at a news conference on Wednesday.

"By removing the provincial portion of the HST from qualifying purpose-built rentals, thousands of homes that would otherwise not have been built have now become economically viable and can move forward in the coming years," added Municipal Affairs and Housing Minister Paul Calandra.

The province says it's been advocating for the past year to get the federal government to remove its portion of the HST for certain purpose-built rental housing, in part because of its goal of building 1.5 million homes by 2031 to keep up with projected population growth. 

To qualify for the tax cut, 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 its residential units designated for long-term rental, the province states.

The HST removal applies to new purpose-built rental housings such as apartments, student housing and senior residences built specifically for long-term rental accommodation. All qualifying projects must begin construction between Sept. 14 and Dec. 31, 2030, and be completed by the end of 2035.

Until now, the federal and provincial governments have been providing a partial HST rebate.