Question Period Note: Pro-Housing Tax Measures

How is the Government of Canada using tax measures to accelerate investment to build more housing?

• This government is using a number of tax measures to support the construction of more housing in Canada by supporting rental projects, first-time homebuyers and homebuilders directly.

• The Goods and Services Tax (GST) has been removed on new rental projects, incentivizing the construction of more apartment buildings, student housing, and senior residences. For a two-bedroom rental unit valued at $500,000, for example, the initiative is expected to deliver $25,000 in tax relief.

• The GST is also eliminated for first-time home buyers on new homes up to $1 million, and reduced for first-time home buyers on new homes up to $1.5 million. This will lower the upfront cost of buying a new home for young Canadians by up to $50,000, and spur the construction of new homes across the country.

• The federal government is creating the financial incentives to build more homes, faster, by removing the Goods and Services Tax (GST) from new purpose-built rental housing projects, such as apartment buildings, student housing, and seniors’ residences.

• Removing the GST from new apartment construction will enable builders to build more projects and create more units at more affordable rents across Canada. The Enhanced GST Rental Rebate applies to projects that begin construction on or after September 14, 2023, and on or before December 31, 2030, and complete construction by December 31, 2035.

• An accelerated capital cost allowance (CCA) for apartments that will increase builders' after-tax return on investment has also been introduced by the government.

• The CCA system determines the capital depreciation deductions that a business may claim each year for income tax purposes. Standard tax treatment for new rental apartment development is to allow 4% depreciation per year for 25 years. Budget 2024 announced an accelerated CCA of 10% per year for 10 years for new eligible purpose-built rental projects that begin construction on or after Budget day and before January 1, 2031, and are available for use before January 1, 2036.

• Both rental housing tax measures will apply to new purpose-built rental housing (i) that is a residential complex with at least four units or 10 private rooms / suites, and (ii) in which at least 90% of residential units are held for long-term rental.

• To be considered a “first-time home buyer” for the purposes of the First-Time Home Buyers’ GST Rebate, an individual would need to meet various conditions, including being at least 18 years of age and being either a Canadian citizen or a permanent resident of Canada.

• The First-Time Home Buyers’ GST Rebate would be phased out for new homes valued between $1 million and $1.5 million. For example, a home valued at $1.25 million would be eligible for a 50% GST rebate (a rebate of up to $25,000).

• No First-Time Home Buyers’ GST rebate would be available for new homes valued at or above $1.5 million.

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