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Harmonized Sales Tax Ontario: Eliminating components for purpose-built rentals – 2023

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The new regulations  regarding the Harmonized Sales Tax, will cover newly constructed rental properties, including apartment complexes, dorms for students, and senior homes.

In an attempt to encourage development, Ontario is eliminating its share of the Harmonized Sales Tax on qualified purpose-built rental properties.

The province has stated that if the federal government eliminated the 5% goods and services tax on the construction of rental homes, it would remove its 8% share of the Harmonized Sales Tax.

That was done by the federal government last month.

The modifications of the Harmonized Sales Tax will be implemented for newly constructed rental housing, including apartment complexes, dorms for students, and senior homes intended for long-term care rentals, according to Ontario Finance Minister Peter Bethlenfalvy.

The projects that started building this past September and finished by December 31, 2030 are eligible for the rebates.

For new residential units to be eligible, the building must have at least four private apartment units or ten private rooms, and 90% of the units must be long-term rentals.

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Have you ever had the sensation of being lost in a maze of tax terminologies? Welcome to the world of the Ontario Harmonized Sales Tax and policies!

In this article, we’ll dive deep into Ontario’s decision to eliminate its share of the Harmonized Sales Tax on purpose-built rentals. Buckle up; we’re in for an enlightening journey.

Harmonized Sales Tax: Unpacking the Basics



Imagine blending two colourful paints together to create a new shade. That’s the idea behind the Harmonized Sales Tax (HST). It is a combination of the federal goods and services tax (GST) with the provincial sales tax (PST). Originally designed to simplify tax systems and create a unified approach, the Harmonized Sales Tax is a prominent financial tool impacting both businesses and consumers.

Now, when we talk about purpose-built rentals, we’re discussing properties specifically designed for renting rather than selling. With the rapidly changing urban landscape and increasing demand for rental spaces, purpose-built rentals have become a cornerstone of modern housing in Ontario.

Ontario’s Revolutionary Move

Amidst an escalating housing crunch and concerns of rental affordability, Ontario has played a strategic card. By waiving off its segment of the Harmonized Sales Tax on new purpose-built rental apartments, the provincial government aims to create an atmosphere conducive to increased construction of these rental spaces. It’s akin to a store putting up a sale to lure in more customers.

Here, the discount is on taxes (Harmonized Sales Tax), and the target audience is property developers.

Decoding the Impact for Renters

For the average Joe and Jane, what does this Harmonized Sales Tax decision signify?

Think of the last time you were at a buffet with limited food options, but then they suddenly expanded the spread. More choices lead to a richer experience. Similarly, this move could potentially flood the market with a broader range of rental accommodations.

More Availability: As developers find it more profitable to construct rental units, renters can expect to see a surge in available properties with this new news on the Harmonized Sales Tax.

Rent Stabilization: With an increased supply, the demand-supply gap narrows. Basic economics tells us this can stabilize or even reduce rental prices over time.

Quality of Living Spaces: The hope is that competition among developers will not only regulate prices but also encourage the creation of quality rental spaces.

Pros and Cons: A Balanced View

Every coin has two sides, and so does Ontario’s Harmonized Sales Tax decision:


Incentivizing Construction: Developers are more likely to venture into the rental space, given the tax (Harmonized Sales Tax)  relief.

Direct Benefit to Renters: With potential rent stabilization and increased options, renters stand to gain significantly.

Economic Boost: A thriving construction sector can have ripple effects on the economy at large.


Short-Term Fiscal Impact: The immediate revenue loss from the tax (Harmonized Sales Tax) cut might strain the province’s finances.

Quality Concerns: There’s a thin line between rapid construction and compromised quality. This balance is essential.

Market Over-saturation: Too much supply can sometimes backfire, leading to vacant properties and an unstable market.

Interprovincial Comparisons

As unique as Ontario’s move sounds, how does it fare when juxtaposed with policies in other Canadian provinces?

While certain provinces offer Harmonized Sales Tax exemptions or reductions in varied sectors, Ontario’s pinpoint focus on purpose-built rentals is somewhat unparalleled. This strategic differentiation could either set Ontario as a trendsetter or a lone experimenter in the vast Canadian landscape.

Developers’ Perspective: Boon or Bane?

From a developer’s vantage point, the Harmonized Sales Tax exemption seems like a golden ticket. The reduced financial burden can translate into either increased profits or the flexibility to offer competitive rental rates. However, with great power comes great responsibility. The ball is now in the developers’ court to ensure they harness this opportunity judiciously and contribute positively to Ontario’s rental landscape.

Predicting Ontario’s Rental Market Future

Foreseeing the exact trajectory of Ontario’s rental market in the wake of this policy change is akin to reading tea leaves: speculative yet fascinating. Initial indicators, backed by economic theories, hint at a robust and vibrant rental market.

Yet, as with any policy shift, only time will unfurl its true impact.

Affordability and Harmonized Sales Tax: Making the Connection

At its core, the Harmonized Sales Taxwaiver aims to address the burning issue of housing affordability in Ontario. By encouraging the construction of more rental units, the province hopes to bring down rental prices through natural market forces. It’s a strategic move, akin to sowing more seeds in a garden to ensure a richer harvest.

A Broader Lens: Worldwide Scenario

Zooming out, rental affordability isn’t solely an Ontario or Canadian challenge. Major cities worldwide grapple with skyrocketing rents and housing shortages.

In this global context, Ontario’s tax AKA Harmonized Sales Tax, maneuver positions it as a potential trailblazer, offering a unique solution to a universal conundrum.

Personal Takeaways: How it Resonates with You

Boiling down this vast ocean of information regarding the Harmonized Sales Tax, what should you, as an individual, extract from it?

If you’re a prospective renter, keep your eyes peeled for an expanding array of rental options in the coming years. For property developers, this might be the opportune moment to pivot towards the rental construction sector. Contact us if you need help or guidance throughout the complex markets.

Closing Thoughts: Reflecting on the Change

Ontario’s Harmonized Sales Tax exemption on purpose-built rentals isn’t merely a policy alteration; it’s a reflection of the province’s adaptive strategy to evolving housing needs. While the move is laudable and holds immense potential, its true success lies in effective execution and continuous monitoring.


What is the Harmonized Sales Tax (HST)?

The HST is a combined tax that merges the federal GST with the provincial PST.

Why did Ontario decide to remove its Harmonized Sales Tax portion on purpose-built rentals?

The primary motive is to stimulate the construction of more rental units, addressing housing challenges.

How does this policy shift benefit renters?

It can lead to an increased supply of rental units, potentially stabilizing or reducing rents.

Click here to view our active listings.

Click here to view our SOLD listings!

Contact us regarding any information on Real Estate.

Phone: 416.578.5973
Email: [email protected]

Click here to read more from our Blog Page!

Click here to read our extensive article on everything you need to know for Snake Island Georgina!

Click here to visit my Instagram!

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