Ontario Announces Enhanced New Housing Rebate: What Builders and Developers Need to Know

Recently, the Province of Ontario introduced its 2026 Budget and announced its intention to enhance the existing Harmonized Sales Tax (“HST”) rebate available for qualifying new homes in Ontario (the “Enhanced New Housing Rebate”). The Enhanced New Housing Rebate does not eliminate the existing new housing rebate currently in effect, but rather is intended to further reduce, and in some cases eliminate, all 8% of the provincial portion of HST on qualifying new homes. The federal government is expected to take corresponding measures respecting the 5% federal portion of HST.

For builders and developers, the implications of these changes are potentially significant, as they aim to increase affordability and spur purchaser activity in a currently challenging market.  

The Rebate Mechanism

The Province’s Enhanced New Housing Rebate would eliminate the full 8% provincial portion of HST on new homes valued up to $1 million (i.e. a rebate of $80,000), while homes priced between $1 million and $1.5 million are to receive the same maximum rebate amount of $80,000. For homes valued between $1.5 million and $1.8 million, the rebate would gradually decrease from $80,000 to the existing $24,000 available under the current provincial rebate. Homes above $1.85 million would only be eligible for the pre-existing $24,000 rebate.

Eligibility Criteria

The New Housing Rebate is subject to the following eligibility criteria:

1. Primary place of residence. The purchaser must acquire the new home for use as their primary place of residence. 
2. Purchase Agreement. The purchase agreement must be signed between April 1, 2026, and March 31, 2027.
3. Construction. Construction of the home must begin on or before December 31, 2028, and be substantially completed on or before December 31, 2031.

The Ontario government is also offering a similar rebate in respect of new residential rental properties (the “New Residential Rental Property Rebate”), which is subject to the following eligibility criteria:

1. Residential rental property. The purchaser must acquire the new home for use as a residential rental property.
2. Purchase Agreement. Like the New Housing Rebate, the purchase agreement must be signed between April 1, 2026, and March 31, 2027.
3. Construction. Construction of the home must have begun before March 31, 2026, and be substantially completed on or before December 31, 2029.

The New Residential Rental Property Rebate is aimed at offering HST relief for projects already under construction as well as certain existing inventory for which construction commenced before March 31, 2026. In contrast, the New Housing Rebate applies to construction begun anytime before December 31, 2028. Accordingly, the New Housing Rebate offers a longer timeline for potentially qualifying projects to attract pre-construction purchasers.

Collaboration with the Federal Government

The Ontario government announced the Enhanced New Housing Rebate prior to the passage of corresponding federal legislation. While the Province has made clear that it is working with the federal government to implement the changes, the new measures remain subject to the federal government enacting the applicable changes to the Excise Tax Act.  

Accordingly, builders and developers should keep in mind that for any qualifying new homes transferred before the updated legislation is finalized, the builder/developer and purchaser may only be in a position to adjust on closing for the applicable existing rebates (including the existing Ontario rebate up to $24,000 and the recently enacted federal First Time Home Buyer’s GST/HST Rebate, if applicable). In such cases, it’s anticipated that qualifying purchasers may apply directly to Canada Revenue Agency for the Enhanced New Housing Rebate once the applicable legislation is effective.

The Enhanced New Housing Rebate is temporary and time limited. As such, builders and developers must act fast, in concert with their sales teams and legal counsel, to consider how the proposed HST relief may benefit proposed and existing projects.   

For more information on the proposed legislative amendments, including updates once the changes come into effect, please contact a member of the Torkin Manes’ Condominium/Subdivision Development team.