How Ontario's new HST rebate changes new home pricing

Base price excluding any HST = ($925,000 + $24,000) / 1.13 = $839,823.01

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).

Base price excluding any HST = ($925,000 + $24,000) / 1.13 = $839,823.01

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).

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