Ottawa's GST/HST relief for first-time new home buyers is a broken promise — and too little, too late for GTA

Toronto Star

18 hours ago

Two weeks ago, the federal government unveiled a measure designed to improve housing affordability: a targeted GST/HST rebate for first-time buyers of newly built homes.
Unfortunately, this narrowly focused policy is not just inadequate, it's a broken promise decades in the making.
The new proposal offers a full GST/HST rebate for first-time buyers of new homes up to $1 million, with a partial rebate for homes priced between $1 million and $1.5 million.
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While this may sound generous on paper, it ignores the reality for hundreds of thousands of Canadians in the Greater Toronto Area (GTA) and lower mainland British Columbia, where average prices for new homes exceed these thresholds. In practice, very few buyers in these two key regions will benefit.
The Building Industry and Land Development Association (BILD) has made its position clear: this initiative is both geographically biased and far too narrow in scope to meaningfully impact affordability. But what makes this situation worse is the federal government's failure to uphold a commitment it made to Canadians more than three decades ago.
When the new GST was being designed in late 1980s, very specific thought went into how the tax would apply to new homes and how the rebate structure would be put together to ensure that the tax would not impact affordability.
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A federal technical paper released in 1989 by then-Finance Minister Michael Wilson outlines those homes under $350,000 would receive a rebate of up to 36 per cent of GST paid, tapering off to zero at $450,000. As seen on Page 19 of this technical paper, the government also committed to reviewing and adjusting these thresholds every two years to keep pace with economic and housing market conditions.
That review and adjustments never happened.
At the time, the government estimated that 95 per cent of new homes would qualify for at least a partial rebate, with 90 per cent receiving the maximum. This promise helped sell the tax to Canadians with the reassurance that GST would not be a barrier to home ownership.
Today, that assurance rings hollow to buyers in the GTA, where average new home prices have long since eclipsed those 1990s thresholds and so now virtually no homes in the region qualify for a rebate. What was supposed to support 95 per cent of new homebuyers now supports close to 0 per cent.
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According to Canada Mortgage and Housing Corporation (CMHC), the average price of a single-detached home in Ontario has increased from $276,000 in 1990 to $1,023,000 in 2023, an increase of 270 per cent. Over the same period, the net federal HST collected on these homes increased by 479 per cent, from $8,832 to more than $51,000.
This isn't just a statistic; it's a growing burden.
That additional $43,000 in taxes, when rolled into a standard 25-year mortgage at 4 per cent, results in an extra $220 in monthly payments, $24,000 in additional interest, and a total financial hit of more than $66,000 over the life of the loan. And that's for a typical new home, not a luxurious mansion.
In fact, by failing to update the rebate thresholds as promised, the federal government has quietly extracted nearly $4 billion in additional GST/HST revenue from new homebuyers in Ontario alone — most of it in just the last decade.
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The federal government's recently proposed GST/HST relief on new homes for only first-time buyers does not even begin to address the real problem. First-time buyers represent just five-to-10 per cent of new home purchases in the GTA. The rest, like young families upsizing and seniors downsizing, get no help.
Plus, the proposed program is geographically biased, as the average price for a condo in the GTA is more and $1 million and the average price of a single-family home (including townhouse and semis) is more than $1.5 million — meaning even those who qualify in the GTA will receive less relief than buyers in lower-cost markets, despite paying more for the same (or lesser) product.
The government acknowledges that GST/HST contributes to unaffordability but stops short of meaningful action, so if the federal government is serious about addressing the housing crisis, it needs to start by removing the barriers it helped build.
This means expanding GST/HST relief to all new home buyers, not just first-time buyers, and adjusting the rebate thresholds to reflect today's housing markets across the country.
This isn't radical, it's simply delivering on a promise made in 1989 and long overdue.