OTTAWA - A new deal between the Ontario and federal governments could soon see the cost of a new home in Ontario drop by up to $130,000.
As of April 1, eligible buyers in Ontario will no longer have to pay 13 per cent HST on new homes valued at up to $1 million dollars, for a maximum rebate of up to $130,000. Those choosing to purchase a newly constructed home valued between $1 million and $1.5 million will be eligible for a maximum rebate of $130,000. Buyers of new construction homes valued at $1.85 million or above will be eligible for a $24,000 rebate.
Speaking in Toronto on Monday, Prime Minister Mark Carney said the partnership with the Ontario government will provide almost $2.2 billion in total tax savings for Ontarians and “catalyze” home building.
“It will catalyze an additional 8,000 housing starts in Ontario next year – supporting up to 21,000 jobs in the skilled trades and boosting Ontario’s GDP growth by $2.7 billion,” Carney said.
The tax relief measure will take effect on April 1, 2026, and expire on March 31, 2027. It is unclear whether anyone who signed a contract for a new build before April 1. will be eligible for any financial relief.
Scott Andison, CEO of the Ontario Home Builders’ Association, says the HST rebate – which he calls a kickstart – will apply on the agreement of purchase at the time of sale. He says the new measure will apply to existing, unsold inventory, as well as new homes to be developed in the next few years.
Andison believes the changes will help get prospective buyers into model homes and sales centres.
“We need them there now,” he said. “We need to sell out the existing inventory that home builders are carrying and then we need to get back to the work in terms of getting new shovels into the ground and new homes build.”
Andison says that if the rebate works to kickstart sales as expected, it could help make new neighbourhoods less expensive moving forward.
The measure, which the Ontario government has talked about before, is part of a $1.7 billion federal government plan to boost housing transfers to the provinces and territories.
Bill C-26 unveiled Thursday, makes a one-time total payment of $1.713 billion available to the provinces and territories for the purpose of improving housing. How much each province and territory will receive is up to the finance minister, but will be based on an algorithm that takes population into consideration.
Speaking last week, Finance Minister François-Philippe Champagne said provinces and territories will have flexibility on how they use the transfer.
Asked how many homes these measures will create, David Wilkes, president and CEO of Building Industry and Land Development Association (BILD), said he anticipates the changes will “double the starts we are seeing” over the next several years.
“There is one fundamental fact: this industry had stalled,” said Wilkes. “We were selling homes at 85 per cent of the rate that we had over a ten-year period.”
Reducing development charges
In addition to the GST/HST changes, Ontario is also committing to reducing development charges by half for three years.
“In recent years, they have been growing at an unsustainable rate – increasing the cost of every new home, compressing margins, and stalling new builds,” Carney said.
The Ontario Home Builders’ Association says that in many communities, especially across the Greater Toronto Area, government charges on a new home account for at least 25 to 30 per cent of the final purchase price.
In Ottawa, the one-time development fee on a single-detached and semi-detached dwelling ranges from $44,666 to $55,982, depending on where it is located in the city.
It is unclear how quickly the reduced development charges will take effect, but experts say this is a more forward-looking measure that impacts future developments.
Ottawa will invest $4.4 billion over 10 years through the Build Communities Strong Fund to ensure Ontario’s infrastructure needs are met when municipal development charges are cut. Ontario will match that commitment, bringing the total investment to $8.8 billion.
Conservative housing critic Scott Aitchison says what’s missing is a long-term plan to bring and keep down costs.
“I think it will do something very briefly, and for a short spurt,” he said. “But if the government charges so much tax on new homes, then we need to permanently reduce these taxes. On average, 30 per cent of a new home in Ontario is government.”
Aitchison says today’s proposal is a start, but that the measures are too short-lived.
“The developers will see this as a good start, as something that will get things moving again,” he said. “It takes a few years to get homes built, and I worry that a one-year reprieve on the HST and only three years of getting development charges that isn’t a long enough window to really get housing, the housing construction business moving again.”
According to the Canada Mortgage and Housing Corporation, between 430,000 and 480,000 new homes will need to be built annually over the next decade to restore affordability levels last seen in 2019. The CMHC said this is an approximate doubling of the current pace of home construction.
In 2025, the CMHC said housing construction increased six per cent, year-over-year to 259,000 units. The increase was driven by rental, apartment construction.
