Last Updated on February 23, 2024 by CREW Editorial
The federal government unveiled a plan to eliminate GST on purpose-built rental construction until 2030—a move it hopes will spur new units across the rapidly growing country.
“With provinces like Ontario and Newfoundland and Labrador following our lead by eliminating provincial taxes on new rentals, we’ll get more rental housing built faster and encourage new builds to break ground,” Deputy Prime Minister and Finance Minister Chrystia Freeland said.
The GST freeze expires Dec. 31, 2030, and will apply for developments completed exactly five years to the day.
The move is also being hailed by segments of the building industry in light of Canada’s record pace of growth. Immigration, Refugees, and Citizenship Canada has set quotas to welcome 465,000 newcomers this year, 485,000 in 2024, and 500,000 in 2025.
According to Adrian Rocca, CEO of Fitzrovia, a purpose-built rental developer, suspending GST until the decade’s end will reduce the financial risk associated with rental apartment construction.
That’s truer today than ever before, as material costs are stubbornly high and municipal governments keep imposing taxes on new construction.
“The removal of GST on new rental developments adds a higher level of assurance for the economic feasibility of these communities,” said Adrian Rocca, CEO of Fitzrovia. “Additionally, it actively fosters the growth of rental housing, which is greatly needed.”
Fitzrovia has become a premier developer of purpose-built rental buildings in Toronto. Rocca is acutely aware of the monumental shortage of rental units in the fast-growing metropolis, and Fitzrovia has even gone on to develop a brand of builds called Maddox.
Maddox is intended to play a crucial role in helping families find rental housing, which has become especially difficult in post-COVID-19 Toronto where the city is growing at a record pace, although its appeal casts a wider net.
“This development is truly exciting, as it will stimulate the growth of rental communities and, subsequently, contribute to expanding the availability of homes for Canadians and new immigrants,” Rocca said.
But Richard Lyall, the president of the Residential Construction Council of Ontario and a regular CREW contributor, says that, while he welcomes the GST freeze, more is needed.
“By itself, it won’t solve the problem. It’s one of the things that needs to be done, but there’s no silver bullet for the housing problem because it’s so complicated, and so many things need to happen. By itself, [the GST freeze] won’t solve the problem.”
Conclusion
While the federal government’s GST freeze on new rental construction until 2030 has been well-received by the development industry, potentially speeding up the building of rental units to meet the growing housing demand, the issue is far from solved. While this is a positive step, it’s just one part of a broader solution needed to tackle Canada’s complex housing challenges.
