In a surprising and exciting move, the Canada Government has said goodbye to the Goods and Services Tax (GST) for new rental construction. Prime Minister Justin Trudeau shared this news in London, Ontario, and it's a huge deal for the real estate and housing world. Before, builders had to pay 5% GST on the value of their rental projects, making it tough for them to invest in apartments. This blog dives into what this decision means for developers and renters.
In the old days, developers building new rental buildings had to pay GST on everything, from construction costs to land value. This tax added a lot of extra expenses, making projects more costly. While there were some refunds for units priced between $350,000 and $450,000, they didn't always help much.
Interestingly, condo builders didn't have to worry about GST because homebuyers paid it individually. This made the housing market uneven and raised questions about whether the tax system was fair for everyone.
Building housing is a business, and making money is important. The GST problem, combined with rising construction costs and other fees, kept developers from investing in rental housing. This led to higher rents for tenants and slowed down the growth of rental properties.
The housing industry is thrilled about this change, with many saying it's a great move to encourage more rental housing construction. For builders, not having to pay GST could make projects that barely made money before now work out. Josh Lerner from Harbour Equity, a big investment company, said the cost reduction from removing GST makes them more confident about investing.
While this announcement is a big deal, there are still questions. We don't know if this GST removal applies to projects already done or only to new ones. There might also be rules about the types of rental homes, how they're built, or their sizes that we don't know yet. We're waiting to hear about details like when this change takes effect, just like the foreign buyer ban.
Prime Minister Trudeau didn't say when the GST would disappear, but he mentioned they'll change the laws. Even with questions, getting rid of GST for rental buildings is a big step toward more rental housing in Canada. Real estate experts and builders see this as a good thing that could change how rental housing works.
While everyone's celebrating, we're also hoping for more ways to support housing development, like bringing back the Multi-Unit Residential Building (MURB) program from the past. For now, everyone in the rental housing world is enjoying this big win. Saying goodbye to GST for new rental construction is a big moment in housing. It solves a long-time problem, helps builders, and brings hope for more affordable rental homes for Canadians. As we learn more, the housing industry is eager to see this game-changing policy in action.