In a move universally applauded – if somewhat overdue – the Ontario government has announced it will remove the full 13 per cent of the Harmonized Sales Tax (HST) for eligible buyers of new homes valued up to $1 million, for a maximum rebate of $130,000, as part of the upcoming 2026 Budget. This maximum rebate of $130,000 would be maintained for new homes valued up to $1.5 million, and would decrease proportionally from $130,000 at $1.5 million to a maximum of $24,000 for homes valued at $1.85 million and higher, building on the province and federal government’s previous move to rebate the HST for all first-time buyers of new homes up to $1 million.

The federal government has agreed to cost-share with Ontario in support of provincial housing initiatives, subject to passage of federal legislation, which would cover approximately the federal five-per-cent portion of the HST that is being removed from new homes in Ontario. This partnership would provide almost $2.2 billion in total joint tax relief for housing in Ontario.

Meaningful and significant relief

“(This) announcement will provide meaningful and significant relief to the people of Ontario, helping thousands more families realize the dream of homeownership and boosting Ontario’s economy by $2.7 billion,” says Premier Doug Ford.

The province says the proposal would strengthen the existing provincial HST New Housing Rebate and New Residential Rental Property Rebate for one year, from April 1, 2026, to March 31, 2027, temporarily removing the HST for eligible buyers of qualifying new homes. For new homes valued at or higher than $1.5 million, a reduced rebate will be available. Higher-valued new homes that would have qualified for the maximum rebate of $24,000 under the current rules will qualify for at least that amount under the expansion. The expanded 13-per-cent HST rebate could stimulate an additional 8,000 housing starts in Ontario next year, supporting up to 21,000 jobs.

Says Peter Bethlenfalvy, minister of finance, “With this enhancement and expansion of the HST rebates, we are supporting home affordability while providing relief to hardworking Ontario families on one of the biggest financial transactions of their lives.”

Suite of measures

In addition to these measures, Ontario is expanding the HST relief for first-time homebuyers on new homes announced last fall, taking steps to align the effective date of the provincial HST rebate for first-time buyers with the federal government’s newly proposed earlier effective date of March 20, 2025.

The government says it is taking action with a suite of measures to help increase the supply of affordable homes, support housing development and foster a robust housing industry across Ontario. This includes removing the full eight-per-cent provincial portion of the HST on qualifying purpose-built rental housing. The province is also providing historic housing-enabling infrastructure funding through the $4-billion Municipal Housing Infrastructure Program and the $1.2-billion Building Faster Fund, which rewards eligible municipalities that make real progress in getting shovels in the ground to build new homes.

Homebuilding industry groups are calling the move a “game changer” that could provide a significant boost to the market as we near the spring busy season.

Major step toward unlocking affordability

“At a time where we are facing huge economic uncertainty and a slowing housing industry, this is a major step toward unlocking affordability in Ontario’s housing market and supporting the broader economy. This is great news for both new home purchasers and the 100,000s of workers in our industry,” said Dave Wilkes, president and CEO of the Building Industry and Land Development Association (BILD).

BILD and the Ontario Home Builders’ Association (OHBA) say the leadership shown by the Ontario and federal governments will stimulate economic activity and support jobs at a critical period for the region, province and the nation. This measure will reduce upfront costs for homebuyers, strengthening their purchasing power and improving mortgage qualification outcomes. It will also encourage new home purchases, ultimately leading to increased housing starts, construction jobs and future supply.

“With affordability challenges sidelining many potential buyers and new home sales slowing across the province, (this) announcement provides meaningful relief for homebuyers and much-needed support for Ontario’s residential construction sector, professional renovation industry, and their workers to restore the pipeline of much needed new homes across the province,” says OHBA CEO Scott Andison.

The industry has been facing increasing pressures in recent years as housing affordability has been affected by rising construction costs, regulatory requirements and government-imposed taxes and fees. In many communities, especially across the GTA, government charges on a new home now account for at least 25 to 30 per cent of the final purchase price. This has created a situation where the cost to build a new home has been outstripping the market’s ability to absorb, leading to a prolonged period of slow sales and lower starts, eroding future supply.

The Residential Construction Council of Ontario (RESCON) says the measure is a bold and timely move that will breathe new life into the struggling residential construction sector.

Additional action required

“This is a critical step towards making new homes more affordable and demonstrates that Premier Doug Ford and Prime Minister Mark Carney understand the severity of the housing downturn and the urgent need for decisive action to restore confidence in the market,” says RESCON President Richard Lyall. “It is a necessary initiative given the depth of the market downturn and grim outlook for the industry. This will help revive residential construction and save industry jobs.

“The stakes for our industry could not be higher,” adds Lyall. “Residential construction is one of the key economic engines of this province. When projects stop moving forward, it affects everyone from skilled tradespeople and apprentices to manufacturers and local businesses.”

RESCON maintains that additional action will still be required to right the ship, such as reforming development charges, providing faster approvals and removing barriers to housing delivery. The group says over the past 25 years, development charges in Toronto have risen by more than 5,000 per cent - far outpacing inflation, which increased by just over 70 per cent during the same period, according to the Missing Middle Initiative.

“Housing shouldn’t be taxed like alcohol or tobacco,” Lyall says. “It is a basic economic necessity and the foundation of healthy communities and a strong economy. Builders are ready to build and continue to work with government to remove the remaining obstacles that prevent builders from delivering homes that are affordable.”

Resale approval

And on the resale side, the Toronto Regional Real Estate Board (TRREB) also says the announcement represents an important step toward addressing housing affordability challenges. It says removing this tax burden will help lower the cost of new housing, improve the feasibility of bringing new projects to market, and support greater housing supply across Ontario, especially supply of missing middle housing, including multiplexes and midrise development units.

Like the other housing groups, TRREB says it has consistently advocated for this type of reform. “Through leadership of a TRREB-led Housing Advancement Coalition, we joined local, provincial and federal builders, innovators, trade and labour associations, rental providers, not-for-profit organizations and other industry partners in calling on governments to expand the HST rebate on new homes to all buyers.”