Dr. Mike P. Moffatt4d ago

Thread time! The province of Ontario in conjunction with the feds made two big, albeit temporary changes, to the HST and housing. One we've discussed a lot at the Missing Middle, and the other one... not so much.

Here's what was announced this morning.

Show threadDr. Mike P. Moffatt4d ago
For a period covering 1 year (Apr. 1 2026 - Mar. 31 2027), the province and the federal government are enhancing the New Housing Rebate and New Residential Rental Property Rebate, two pre-existing rebates, to put them in line with the new First-Time Home Buyers Rebate.
Show threadDr. Mike P. Moffatt4d ago

The existing rebate only covers a small fraction of the HST payable on a new home (and HST is only paid on new homes), and maxes it fairly quickly.

The expanded programs will cover 100% of the HST paid on a home under $1M, and a reduced percentage after that, as shown below.

Show threadDr. Mike P. Moffatt4d ago
The "New Housing Rebate" is only available to purchasers of primary residences. That is, people who buy a home to live in. We've done a lot of work at MMI, and have advocated for this change for some time.
Show threadDr. Mike P. Moffatt
The second rebate (New Residential Rental Property Rebate) is a little bit more politically charged. Investors of new homes can qualify for this rebate under certain conditions: The buyer can't flip the home, it has to be immediately rented on a lease 1+ years in length.
Mar 25 at 3:08pmFedica
Show threadDr. Mike P. Moffatt4d ago

So it isn't available to all "investors". You can't leave the home vacant, you can't rent it on the short-term market, you can't rent it as a secondary residence (e.g. a cottage). But investors do qualify.

At MMI, it's not a rebate we've studied in any depth.

Show threadDr. Mike P. Moffatt4d ago
One thing this rebate will do is allow condo builders with unsold inventory to be able to rent out those units without getting dinged on HST, which I suspect is why governments extended this rebate.
Show threadDr. Mike P. Moffatt4d ago
These changes immediately reduce the price of new homes for qualified buyers (but not resale) by 10%+, which should help boost new sales while simultaneously avoiding increasing demand in the resale market.
Show threadDr. Mike P. Moffatt4d ago
This will lead to increased homebuilding. Prov estimates 8000 homes a year. In reality, we really have no idea what the impact will be. Any models would use elasticity parameters estimated under very different market conditions; they tell you little about today.
Show threadDr. Mike P. Moffatt4d ago
As such, having this run for a single year makes sense, to test it out and see how it works. It also creates a sense of urgency, and gets potential buyers off of the sidelines.
Show threadDr. Mike P. Moffatt4d ago
Overall, this is a great day! Delighted to see the province and the federal government announce a policy we've spent a lot of time researching at MMI. This will help make it easier for middle-class families to right-size their homes.