On September 14, the federal government announced the removal of Goods and Services Tax (GST) on new purpose-built rental construction.
Termed “the enhanced GST rental rebate," the policy change aims to spur the construction of much-needed rental units amid the country’s affordable housing crisis.
The rebate applies to new projects (not renovations, no matter how substantial) that begin construction between September 14, 2023 and December 31, 2030, which must be completed by December 31, 2035. The rebate jumps from 36% to a full 100%, freeing developers from paying the 5% GST upon completion.
While it’s unclear exactly how much this will shrink the housing supply and demand gap, many developers are optimistic that it will “move the needle.” Already, Dream Unlimited has pledged to build more than 5,000 rental units in direct response to the policy change.
The enhanced GST rental rebate specifically targets multifamily rental housing, as eligible rental buildings must have at least:
- Four private apartment units or at least 10 private rooms or suites; and,
- 90% of residential units designated for long-term rental.
As such, single-family rental property managers and landlords will not directly benefit from the removal of GST on rental construction.
In fact, if the rebate sufficiently drives up supply of purpose-built multifamily rental housing, SFR property managers and landlords may face lower demand and have to reduce rent as a result. However, 3.5 million more units are needed by 2030 to restore affordability, so the SFR market is unlikely to be affected much.
More rental construction headlines
Will a construction labour shortage cement Canada's fate? – PayProp
Feds pledge $20bn in funding for new housing construction across Canada – Mortgage Professional
Housing industry experts draft blueprint to build 2M purpose-built rentals by 2030 – Storeys
