On March 25, 2026, the Ontario government announced that it would be expanding the HST rebate to lower the cost of new homes. Here's the full media briefing PDF. Since then, every developer, lawyer, and sales team in the city has been scrambling to figure it all out and incorporate it into their projects. This includes us.
Today on the blog, I thought it might be useful to do the following: (1) explain how I understand the proposed rebate program works (or will work, to be exact), (2) talk about how I'm seeing the industry respond to the announcement (naturally, there's been some criticism), and (3) shamelessly plug one of our HST rebate-eligible homes at Junction House.
First, I need to caveat this post by saying that, oh boy, I'm not an accountant or lawyer, and that this proposal is still subject to regulatory enactment. So, I could be wrong about something, the proposal might not get passed, or maybe something outrageous happens, potentially precipitated by a post on Truth Social. Do your own research. Talk to your advisors. Having said all this, the industry fully expects this to pass, and developers are already relying on the fact that it will, perhaps by this summer.
Second, it's helpful to understand how new homes are typically priced in the market and how the existing new home HST rebate works. Developers in the Toronto market typically price their homes inclusive of HST, but net of the current new home HST rebate. As it stands today, this rebate caps out at $24,000, translating to an effective HST rate that is lower than the current rate of 13%, depending on the price of the home.
Let me explain:
Price on the purchase agreement: $925,000 (again, this is inclusive of HST but net of the $24k rebate)
Base price excluding any HST = ($925,000 + $24,000) / 1.13 = $839,823.01
HST payable to government = $925,000 - $839,823.01 = $85,176.99
Effective HST rate = $85,176.99 / $839,823.01 = 10.1% (which is less than 13% because of the $24k rebate)
In practice, the way this typically works is that the buyer, who is assumed to qualify for the rebate, assigns it to the developer as part of the closing process. The developer receives the benefit of this rebate, and so they only need to remit the remaining 10.1% to the government. Importantly, this particular rebate is meant for people intending to move into the new home. If they are not doing this, then a separate rebate process applies.
Now, here's what's proposed for the new HST program, which is available only for purchases made between April 1, 2026 and March 31, 2027, and applicable to homes used as a primary place of residence or as a residential rental property:
Up to $1,000,000: Full 13% HST rebate (up to $130,000).
$1,000,001 to $1,500,000: Flat maximum rebate of $130,000.
$1,500,001 to $1,850,000: The rebate phases down proportionally from $130,000 to $24,000.
Over $1,850,000: The rebate is capped at the standard Ontario maximum of $24,000 (same as today).
Given that most developers have been pricing inclusive of HST, but net of the current rebate, there's some math involved to figure out what purchasers will ultimately be paying for a new home bought over the next 12 months. But for homes under $1,850,000, the answer is less than before! (More on this below.)
Another important question is how this will work given that the eligibility time period has started, but the proposal hasn't passed and isn't in force yet. The way we are thinking about it is generally in the following two ways.
If a purchaser is buying a new home and closing on it today, they will have to pay the HST as has been customary in the past, but then the expectation is that, once the proposal is enacted, the purchaser will get it refunded (as per the above). Going back to our $925k example above, the $85k would still get paid up front, and then remitted to the government, but then the purchaser would get it back, bringing their net price down to $839k.
If a purchaser is buying a new home today and expecting to close on it after the proposal is enacted, one reasonable assumption is that the proper protocols will be in place such that the purchaser isn't paying the HST upfront only to get it back later. In our example, they would instead be paying the $839k up front. Developers are contracting for this scenario today, but how exactly the paperwork will flow in the future remains TBD.
One of the unexpected benefits of this proposal, at least for me, is that it has me thinking more in terms of net prices, excluding any HST. And I like this better. I think it's a more transparent way to communicate with purchasers. We as an industry should use this moment as an opportunity to move toward this practice.
In fact, what I would like to be able to do is enumerate the following to buyers: "Here is the price of your new home. Now let's add the HST, development charges, education development charges, parkland dedication fees, community benefit charges, and so on." Because I think, only then, would it become clear to the general public how much we tax new housing.
Now let's talk more broadly about how the market is responding to this proposal.
One of the criticisms of this proposal is that it will only serve to increase developer margins. And indeed, this proposal does represent a cost reduction in development pro formas. But what I will say is that every single developer that I have spoken to is using this as an opportunity to reduce their pricing and pass along the savings (typically 1:1) to new home buyers. The reality is that the market is too soft to do anything else.
This is a perfect example of the cost-plus pricing model that we often talk about on this blog. Developers typically price based on their costs. Now that costs have come down (because of this proposal), they are lowering their prices accordingly. And those who do not follow suit will no longer be competitive in the market.
The market froze out in recent years because, suddenly, the price people were willing to pay for new homes was less than developers' costs. The floor had been reached. But now the floor has been lowered in a direct effort to clear out inventory and reset the market. It's a good time to be a new home buyer, and I have already started to feel a change in sentiment across the industry.
On that note, I would like to turn your attention to a penthouse suite at Junction House that we just listed for sale. It's a two-bedroom and two-bath home and, yes, it's HST rebate-eligible! It's one of my favourite suites in the building. If you'd like to learn more, reach out to Paul Johnston at Unique Urban Homes (paul@pauljohnston.com).
One of the benefits of older cities and neighbourhoods is that their scale and rhythm of development often allow for walkability and a wide variety of experiences in a short period of time (here's a related post). The typical characteristics include small lot sizes, diverse ownership, short city blocks, a mix of uses, and visual variety. And in planning speak, this is typically referred to as fine-grained urbanism.
Here's a random block example from Toronto that I'm choosing simply because I had a wonderful sourdough sandwich on this street over the weekend:
The longest lots in the middle of this block are over 45 metres deep and under 5 metres wide. The result is some very long and narrow buildings, but at the same time, a lot of storefront variety when you're walking along Dupont Street. It has the bones for a great retail street. The only problem is that, for the most part, we don't build our cities like this anymore. We do the opposite. We build bigger, which is conversely referred to as coarse-grained urbanism.
But since we know that fine-grained urbanism makes for better street experiences, it is common to try to impose it on new developments. Cities will say, "Hey, I know that you have a big, wide, shallow retail space on the ground floor of your building, but can you chop it up into smaller, fine-grained spaces such that they all become totally unleasable?" (I half kid. See here for some context.)
The result:
To be clear, I am in no way picking on this development. As a rule, I don't do that sort of thing on this blog. Development is hard. I also like it. I just think it's perhaps the clearest example of what all urban-minded planners and developers are trying in earnest to do, and that is to create coarse-grained urbanism masquerading as fine-grained urbanism. The architectural rhythm of the storefronts matches the existing context, but the scale of the retailers may not.
And that's okay. This is the reality of the world today, and modern retailers want what they want. I'm also a believer in the power of free markets. But to this same end, I want to point out something that is exceedingly obvious: the best way to create fine-grained urbanism is to simply encourage small-scale development!
Every hurdle we erect only increases the incentive for developers to build bigger and coarser. It becomes the only way to underwrite profitable projects. The solution is to lower the barriers to development and, in turn, make small more feasible. Because if we do that, we already know it'll make our cities better. I think we'll also find that the market will respond with a different category of tenants and entrepreneurs.
Tomorrow, we'll talk about the specific ways in which Toronto and other cities could execute on this better.
This past weekend, the Brazilian-Japanese coffee house, The Coffee, soft-opened at the base of Junction House (right at the corner of Dundas St W and Watkinson Ave). And it was busy! I've been eagerly awaiting this opening since it was first announced last year.
But not for any direct economic reasons — unless, of course, it reminds you that you should buy a new home at Junction House! As I mentioned before, we (the developers) no longer own this retail space. This is not our tenant.
I'm mostly excited as a proud resident of the Junction, and because I think it's a perfect fit for the building and the neighourhood. So, I would encourage you to check it out at 2720 Dundas St W. Starting today, any coffee meetings I take in the Junction will be held here.