Removal of GST on Purpose-Built Rentals in Canada
In a significant step toward improving housing affordability and accessibility, the Canadian government recently announced the removal the Goods and Services Tax (GST) on purpose-built rentals. The GST is being removed by an increase to the GST New Residential Rental Property rebate from 36% to 100%.
Why Remove GST on Purpose-Built Rentals?
The decision to eliminate the GST on purpose-built rentals stems from the government’s commitment to address the housing crisis in many parts of Canada. High housing costs and limited availability have made it increasingly challenging for individuals and families to secure housing. Removing the GST on purpose-built rentals helps contribute to making housing more accessible and affordable for Canadians.
Impact on Property Developers
For property developers, the removal of the GST on purpose-built rentals encourages investment in rental properties, which were previously seen as less profitable due to the GST and HST burden, as neither were fully recoverable and therefore resulted in sunk cost.
This move could lead to an increase in the construction of purpose-built rental units, thus expanding the housing supply and helping to meet the growing demand of Canadians.
Impact on Renters
Canadian renters, especially those in urban areas, have grappled with the rising cost of housing. By eliminating the GST on purpose-built rentals, the government is helping to ease the financial burden on renters. This move will likely result in more affordable rents.
Important date – the enhanced rebate will apply to projects on or after September 14, 2023, and on or before December 31, 2030, and complete construction by December 31, 2035.
While this policy change alone may not solve all housing-related challenges, it is a step in the right direction.