Ontario proposes reinstating the Harmonized Sales Tax (HST) for some first-time homebuyers

Toronto – Ontario Finance Minister Peter Bethlenfalvy announced that his government will offer a partial exemption from the Harmonized Sales Tax (HST) for citizens buying their first homes, as part of the upcoming fall economic statement next week.

The minister explained that the decision aligns with the step taken by the federal government earlier this year, which involves refunding the federal portion of the HST on new or fully renovated homes valued at no more than one million dollars for first-time buyers.

Details of the proposed program

The new proposal will include a full refund of the provincial portion of the HST on homes valued up to one million dollars, with gradual partial discounts for homes valued between one million and 1.5 million dollars.

Bethlenfalvy said this policy aims to “reduce the tax burden on young families and encourage homeownership amid continuously rising prices”.

Additional support for the construction sector

For his part, Municipal Affairs and Housing Minister Rob Flack said the new measure will help stimulate the construction sector and support the launch of more new housing projects, especially with the decline in housing starts below the government’s announced targets.

He added that “removing tax barriers for new buyers and developers is a necessary step to achieve the province’s goals of increasing housing supply and stabilizing prices”.

A coordinated step between federal and provincial levels

Ontario’s government had earlier announced it would follow the federal approach if Ottawa decided to exempt first-time homebuyers from the federal portion of the tax.

The two measures are seen as part of an integrated strategy to improve housing affordability amid a severe housing crisis in the province, where many Canadians face unprecedented increases in real estate prices and bank interest rates.

Economic background

This initiative comes at a time when the pace of new housing construction in Ontario is falling short of government targets, as the province has only achieved part of its announced goal to build 1.5 million housing units by 2031.

Officials hope that the new tax incentives will encourage investors and developers to accelerate construction and give first-time families a greater chance to enter the real estate market.