Important news for developers in the apartment, nursing home and student housing sectors with projects commencing after September 14, 2023 and until December 31, 2030

THURSDAY, OCTOBER 4, 2023 

On September 14, the government of Canada announced a temporary elimination of the federal portion of the HST for all newly constructed rental housing, including apartments, student housing and senior residences. The government of Ontario followed suit with the announcement that it will also eliminate its share of HST. 

This is welcome news in a sector hit by rising interest rates and increased costs.  With the need for rental accommodations in these sectors, this will provide a significant cost reduction for developers.

For projects that started before September 14 the old rules apply.  Under those rules, builders are required to self-assess the GST/HST on the fair market value of the residential component of a building upon the completion of a project. The federal and provincial governments offered some partial relief on the self- assessed tax particularly on units with lower values; however, the developer would incur a cost that was generally in the range of 6% to 10% of the value of the finished apartment building, depending on the value of the units. So, the new rules supply a material reduction in cost to developers moving forward.

To qualify for the elimination of the HST two tests must be met:

(a)     The rental building must contain at least four self-contained apartments for residential units, or at least 10 private rooms or suites for a student housing or seniors’ home, and

(b)    The property must have a minimum of 90% long-term residential units

Among several issues to be clarified is the determination of whether a project began before or after September 14.  We await the final legislation to see the details.

If you have any questions, please reach out.