Enhanced GST Rental Rebate for Purpose Built Rental Housing

The Department of Finance has released a Backgrounder which provides additional details further to the Prime Minister’s announcement which was made on September 14th, 2023 indicating the government’s intention to remove the GST from purpose built rental housing. We now have draft legislation contained in Bill C-56, short titled the Affordable Housing and Groceries Act. At the time of writing, the bill is in its second reading in the House of Commons.

The stated purpose of the enhanced GST rental rebate is to incentivize the construction of rental homes for Canadians.

The enhanced rebate will apply to new purpose-built rental housing construction projects that began on or after September 14, 2023, and on or before December 31, 2030. The project would need to be complete by December 31, 2035.

The current GST rental rebate provides a rebate to residential landlords of 36% of the 5% GST applicable to the purchase price of new residential housing. However, under the current system, the rebate amount is reduced proportionately when the value of the residential property is between $350,000 and $450,000. The rebate is totally eliminated for property values in excess of $450,000.

The new enhanced rebate will be equal to 100% of the 5% GST and will not be subject to any reduction regardless of the value of the property.

According to the Backgrounder:

Qualifying new residential units would be those that qualify for the existing GST Rental Rebate and are in buildings with at least:

1. 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,

2. Ninety per cent of residential units designated for long-term rental.

The Backgrounder makes it clear that 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 rebate.

However, the existing rebate will continue to be available for properties not eligible for the enhanced rebate as long as the conditions for that rebate have been met.

Furthermore, substantial renovations of existing residential complexes are specifically ineligible for the enhanced rebate in order to de-incentivize “renovictions”.

The value of the enhanced rebate will be substantially reduced for residential properties located in HST provinces that do not offer a similar rebate in respect of the provincial portion of the HST or Quebec since it is only the 5% GST that is eligible for the enhanced rebate. Quebec has indicated that it can’t afford to offer the same deal as the Feds. Although Ontario, PEI and Nova Scotia have announced they will harmonize their position with the federal government, it’s not clear whether their intention is to provide a full refund of the provincial portion of the HST or just a partial rebate.  We’ll have to wait and see what the future will bring.

Although the enhanced GST Rental Rebate for purpose-built rental housing will be effective as of September 14, 2023, it is subject to the passage of implementing legislation.

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