There are few housing announcements that have generated as much immediate reaction in Ontario’s housing market as the recent changes to HST relief on new homes.
Prospective buyers who had been waiting on the sidelines for this long-promised tax relief are looking to finally jump into the market, and builders are responding to a huge surge in interest.
However, there are a number of questions about the mechanics of the relief — how it will be applied and who gets to claim it.
The challenge is that what sounds simple — removing HST on new homes — is anything but. The reality involves two overlapping programs, different timelines and rules that are still being finalized.
Here’s what we know so far — and where there are outstanding questions. *As these questions are answered, this column will be updated.*
One additional note: Throughout I’m using the word “relief” more frequently than “rebate” as the expectation is that buyers will not be charged the tax at all, versus a rebate that would typically imply you pay the tax up front and then get reimbursed by the government (the first of many questions about the mechanics of how this is all going to work). But in normal discussions, the two words are going to be used interchangeably.
This distinction is important because if there’s no tax in the price of a new home (“relief”), then the buyer only has to qualify for that new price. If it’s a rebate, then a buyer has to qualify for a higher price that includes the HST, even if they get it back later. And the whole point of this exercise is to make new homes more affordable so that we increase the amount of supply.
There are now two HST relief tracks:
- A first-time homebuyer (FTHB) relief that is retroactive to March 20, 2025.
- A newer, broader temporary relief that applies to all eligible buyers, not just first-timers.
Let’s start with tax relief for all new-home buyers first and then go back to first-time buyers.
What we know about HST relief for all new-home buyers
The temporary HST relief program (sometimes referred to as the “enhanced” rebate program) is for Agreements of Purchase and Sale on new homes that are signed between Apr. 1, 2026, and Mar. 31, 2027. Those homes have to have started construction by Dec. 31, 2028, and be substantially completed by Dec. 31, 2031.
The types of homes that are eligible for the HST relief are:
- Any type of newly constructed home that’s used as a primary residence. It’s expected that CRA will be more vigilant about confirming this.
- A builder’s “inventory” home is also eligible as long as it has never been occupied and you sign the Agreement of Purchase and Sale in the eligible timeframe. This should include homes originally built for another purchaser but went into default and never closed — again as long as it was never occupied.
- A home you build and rent long term, although those homes have to be substantially complete by Dec. 31, 2029. There is an outstanding question of HST relief for buildings with up to three units that we hope will be answered soon (there is already a separate tax relief for purpose-built new rental multi-unit residential buildings, but the threshold is a minimum of four units). The landlord would have to pay the HST up front when building the new home. Once they sign a long-term tenant, the landlord could then apply for the rebate from CRA.
- An owner-built home is also applicable for the relief, however, construction of the home has to begin on or after Apr. 1, 2026, and on or before Mar. 31, 2027. And the home has to be substantially completed on or before Dec. 31, 2029. The owner will likely have to apply for the rebate themselves.
- A substantially renovated home (where 90 per cent or more of the home has been redone) also qualifies for the tax relief.
The headline number, up to $130,000 in HST relief on homes up to $1 million, reflects the eight per cent provincial portion and five per cent federal GST portion.
For new-home buyers, this means that for homes priced:
- ≤ $1 million: full relief of the 13 per cent HST that would normally be applied.
- $1 million to $1.5 million: maximum relief of $130,000 (you pay HST on the portion above $1 million)
- $1.5 million to $1.85 million: relief gradually phases down
- >$1.85 million: maximum rebate of $24,000.
This is probably a good time to explain that there’s been both a GST and PST “rebate” on new homes that have been in effect for a long time. The issue is that the rebates have such low price thresholds.
For the GST rebate, the thresholds haven’t changed since the GST was first introduced:
- Full federal rebate: Available for new homes $350,000 or less
- Partial federal rebate: Available for homes between $350,000 and $450,000
- No federal rebate: For homes $450,000 or more.
For the PST rebate, new-home buyers are allowed to claim 75 per cent of the provincial portion, no matter the cost of a home, but only up to a maximum of $24,000.
The new — up to $130,000 HST — relief includes the above pre-existing rebate(s); it is not in addition to or stackable.
This also seems like a good spot to explain how new-home prices are normally advertised.
When you see a billboard stating “Homes starting at $599,000,” this refers to the base model home, but the price does include the estimated taxes and any applicable rebates or relief.
So, when you sign your Agreement of Purchase and Sale, you’ll actually see more of an itemized list that resembles a regular receipt:
Base home – $553,000
Upgrades – $0 (let’s assume none)
HST – $71,890
PST rebate – -$24,000
$600,890
In regular cases, the buyer assigns the rebate to the new-home builder, who then credits you the value of the rebate in the purchase price as above. Builders then recover it from the Canada Revenue Agency (CRA) later.
(Fun fact: The provincial government is currently considering a requirement for builders to break out the municipal development charges that are baked into the base cost in the above calculation as well. For Ottawa, a single-detached home in the suburbs has development charges of about $65,000.)
Current understanding is that the same process will remain in place and it’s just the amount of the rebate that will increase to match the HST. This is desirable by builders because the process is straightforward and already well established, although final CRA guidance is still needed (more on that later).
What we DON’T know about HST relief for all new-home buyers
I’ve touched on a few questions already that haven’t quite been resolved yet:
- Two- and three-unit rentals
- The mechanics to get the rebate on an owner-built home
- Tax “relief” in the Agreement of Purchase and Sale
But there are other questions, too:
- Custom homes: A custom home would be eligible for the HST relief but, again, the mechanics of who can apply for the rebate are not certain.
- Additional dwelling units / additional residential units (ADUs/ARUs): I would argue that since the relief covers substantial renovations, and you can substantially renovate to add an ARU, then ARUs should be eligible for the relief, whether attached or detached. An ARU/coach house is a new housing unit, even if it’s not legally severable from the original home. Admittedly, it doesn’t seem like the government agrees.
But the biggest question is whether the legislative and regulatory framework for the federal portion of the HST is in place.
The full 13 per cent HST being relieved is true from a consumer perspective, but technically:
- Ontario controls the eight per cent provincial portion
- The full 13 per cent outcome depends on federal alignment, which doesn’t seem to be fully in place yet.
Don’t get me wrong — new-home buyers will get the full 13 per cent off for homes up to $1 million, but the mechanics aren’t fully confirmed yet.
Ministry of Finance officials have indicated that they fully expect the rebate to continue to work as it does currently, and any eligibility criteria should be consistent with the existing rebate program.
Builders are not yet able to simply increase the “rebate” line in the Agreement of Purchase and Sale to match the HST. We’re still waiting for confirmation and forms from CRA.
In short: The framework is clear, but the fine print on the federal-provincial co-ordination details is still being written.
Also, I understand the concern and frustration shared by purchasers who recently signed Agreements of Purchase and Sale, but who do not qualify under the eligibility rules announced by the government.
It’s expected that CRA will closely scrutinize if an agreement that was recently signed gets cancelled and then the buyer signs a new agreement. It’s likely that CRA will not grant the rebate in such cases.
The Greater Ottawa Home Builders’ Association (GOHBA), the Ontario Home Builders’ Association (OHBA) and the industry across the province did advocate hard to have everything retroactive to Mar. 20, 2025, to provide broader alignment. To be clear, the design of the program, including its eligibility criteria, timelines and implementation trigger, was determined entirely by the government.
What we know about HST relief for first-time buyers
This tax relief is for first-time homebuyers (FTHB) exclusively, although the definition of “first-timer” is being expanded to include individuals or couples who have not owned or jointly owned a primary residence in the last five years.
There was significant confusion because it took the federal government nearly a year to put this into place, but now the first-time homebuyers’ GST/HST rebate:
- Eliminates the GST (or federal part of the HST) for first-time homebuyers on a new home valued up to $1 million ($50,000)
- Allows first-time homebuyers to reduce the amount of tax they pay on a new home valued between $1 million and $1.5 million
The FTHB rebate applies to homes purchased from a builder where the agreement was entered into on or after Mar. 20, 2025 (when the federal government first announced its intention), and before 2031, with construction needing to be substantially complete before 2036.
Assignment agreements are ineligible if the underlying agreement predates the eligibility requirements.
What we DON’T know about HST relief for first-time buyers
In the fall of 2025, the provincial government signaled its intent to match the federal relief on the provincial portion of the HST.
But now the reverse is true in terms of having the legislative and regulatory framework in place for the provincial portion of the HST. The province confirmed that it will provide the relief for FTHB in its recent budget. However, CRA guidance and forms aren’t available until the budget measures become law.
The retroactive date for the provincial portion also looks like it won’t perfectly align with the feds — instead of Mar. 20, 2025, the new Ontario relief will be available if the Agreement of Purchase and Sale for the home is entered into with the builder on or after May 27, 2025. Hopefully they align once the final arrangements are made.
In the case of those first-timers who, say, purchased last year, they will likely have to apply for the rebate directly.
Final thoughts
Expanding the HST relief to all buyers was a critical and significant move. Someone in a townhome before couldn’t necessarily afford to move up into a bigger home for their growing family. Now, they’ll be able to afford that bigger home, freeing up more attainable housing options across the market.
As we’re adding to the new housing supply, it’s really providing more housing options for everyone up and down the spectrum.
The opportunity is real, as is the need for clarity. Despite the remaining technical details, it is a great time to buy a new house or condo, purchase a substantially renovated home, or undertake to substantially renovate a home.
