A First in Canada: Federal Government to Remove GST on New Rental Builds

In a significant and much anticipated first, the Federal government has acknowledged the request made by many in the industry to remove the GST barrier from new construction. 

The move was discussed by many, but ultimately fell on deaf ears as a means of spurring the development of more rental homes across the country. Now, senior government sources have confirmed that the Federal government plans on announcing this new policy measure with the hopes of kickstarting a new apartment construction boom in Canada.

This move is expected to pave the way for a resurgence in rental housing construction by alleviating some of the long-standing concerns around inflated costs and the financial viability of new construction. 

The Cost Conundrum

The Canadian real estate industry has been grappling with a critical issue, that being the unchecked growth in the cost of construction. Developers have to contend with the growing cost of materials, labour, and development as a whole which can make new construction a challenge. However, one often overlooked component of the cost of new construction is the Goods and Services Tax (GST). 

The issue lies in the fact that, unlike condominium projects, which are built for immediate sale and realize their entire value upfront, rental apartments generate value gradually over time. This means that upon project completion, the entire cost of the building's GST would have to be paid to the government, well before any actual value has been realized, and well before a developer can get anywhere near recouping the cost of construction. Instead, GST on new rental construction acts as a further burden dissuading developers and making projects which would have otherwise been financially viable, unviable and overlooked.

The removal of GST on new rental construction recognizes that we as a country are in need of a substantial number of new units if we want to ensure housing availability, and affordability throughout. This will be a crucial step in promoting a wave of new construction and boosting economic growth. A bold move in the right direction towards a brighter, and more affordable future for renters across the country.

We hope to see this continued momentum in prioritizing the speedy delivery of new purpose-built rental properties across the country.