The Real Property (GST/HST) Regulations: SOR/2024-157 are aimed at addressing the critical housing availability and affordability challenges facing Canada. The Excise Tax Act serves as the foundational legal framework for these regulations, which seek to incentivize the construction of rental homes amid soaring demand driven by immigration and urbanization. The Canadian Mortgage and Housing Corporation has projected a need for an additional 3.5 million housing units by 2030 to meet the increasing demand.

The Canadian government is focused on reducing housing costs, particularly for renters, by implementing a temporary 100% rebate on the Goods and Services Tax (GST) and the federal portion of the Harmonized Sales Tax (HST) for newly constructed rental housing, specifically designed for long-term rental accommodation. This initiative aligns with provincial efforts, as several provinces—Ontario, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador—have also announced temporary provincial rebates mirroring the federal GST rebate.

The framework establishes that to qualify for the Enhanced GST Rental Rebate, construction must commence after September 13, 2023, and be substantially completed before 2036. This regulation stipulates that properties must initially meet the conditions set by the existing New Residential Rental Property Rebate (NRRPR) and be categorized as “purpose-built rental housing.”

The four participating provinces under the Comprehensive Integrated Tax Coordination Agreements (CITCAs) will have the federal government administer these rebates. Each province has specific rules for their HST components. For instance, Ontario announced an 8% rebate, Nova Scotia a 10% rebate, Prince Edward Island a 10% rebate with certain caps, and Newfoundland and Labrador a 10% rebate fully aligned with federal parameters.

The criteria for qualifying properties, outlined in the regulations, state that to be considered a prescribed property, a multiple-unit residential complex must have at least four residential units with private amenities, or contain 10 or more units. Additionally, all or most units must be classified as “qualifying residential units,” which are intended for rental for a minimum of one year. Properties being converted from non-residential to residential use must also meet strict conditions, ensuring that properties do not bypass the regulations by claiming previous non-residential use.

For provincial rebates, the regulations require compliance with the conditions of the legacy NRRPR. The rebates are intended to lower the financial burden associated with constructing or purchasing new purpose-built rental housing, thereby incentivizing development in Ontario, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador.

Canada (SOR/2024-157) July 17, 2024