New-home buyers need federal HST rebate program that actually delivers

Housing affordability is a major concern for residents in the Greater Toronto Area (GTA), with more than 90 per cent of people agreeing there is a housing affordability issue in the GTA, according to a public opinion survey conducted by Ipsos (on behalf of BILD).

In the midst of these affordability issues, one of the established methods to provide some relief for new-home buyers is the federal GST/HST New Housing Rebate – but it has become painfully clear that the program is out-of-date. If the federal government is serious about tackling the housing affordability crisis, then updating the rebate program is an easy way to have a material impact on affordability for new-home buyers.

Tax and fee burden

Currently, the cumulative tax and fee burden on new homes from all levels of government accounts for 25 per cent of the cost of an average home in the GTA. Of this 25 per cent, a significant part is from HST – but, in theory, the federal part of this tax burden is meant to be partially offset by the federal HST rebate program. However, due to average home costs exceeding the thresholds for eligibility (which were set over three decades ago), the vast majority of homebuyers today see no rebate at all.

Under the program requirements set in 1991, only homes priced below $350,000 receive the full rebate. Homes between $350,000 and $450,000 get a reduced rebate and anything above $450,000 gets nothing. With average GTA home prices surpassing these prices in the early 2010s – and now averaging more than $1 million for single-detached homes – essentially no one has qualified for any part of the rebate for nearly a decade.

When the GST was introduced in 1991, the federal government committed to adjusting these pricing thresholds every two years to keep pace with market changes and to ensure housing affordability was not negatively impacted. Fast forward to today and those promises of regular adjustments remain unfulfilled. Over the last three decades, not a single adjustment has been made despite housing prices increasing 270 per cent between 1990 and 2023. Meanwhile, the net federal HST payments on an average new home has increased from $8,832 to $51,152 in this same period – a 479-per-cent increase.

Outdated rebate program

This outdated rebate program has generated billions in extra revenue for the federal coffers while doing practically nothing to help struggling homebuyers. In Ontario alone, it is estimated that unindexed rebate thresholds on single-detached units have handed Ottawa nearly $4 billion in additional HST revenues, with the majority of this amount ($2.75 billion) occurring over the past decade.

Updating the federal GST/HST New Housing Rebate is a quick and easy way to help new homebuyers from coast to coast. It is time that the federal government lives up to its commitment to review and adjust these thresholds, indexing prices to reflect the current housing market realities.