Tax Holiday on New Homes Proposed in Ontario
Amid a housing crisis, new research is being used to support a proposal for a three-year Harmonized Sales Tax (HST) holiday on new home sales in Ontario. The measure is being advocated as a way to stimulate new home construction and improve housing affordability in the province.
- The provincial government has a target of building 1.5 million new homes by 2031 but is significantly behind schedule. Annualized housing starts are currently under 54,000, which is only about 30% of the province's yearly target of 175,000. - This proposal is separate from an initiative announced in late 2025 to offer first-time homebuyers a rebate for the full 8% provincial portion of the HST on new homes valued up to $1 million. That measure, combined with existing rebates, could save a first-time buyer up to $80,000. - Current HST rebates for new homebuyers in Ontario can be up to $24,000 from the province and up to $6,300 from the federal government, with the federal portion being phased out for homes priced above $350,000. - Housing starts in Ontario saw a 12% increase in January 2026 compared to the previous year, but this followed years of decline and the numbers remain below the 10-year average. The majority of these new builds were multi-unit rental and condo buildings, with construction of single-detached homes at a record low. - Projections from the Building Industry and Land Development Association (BILD) suggest that without intervention, annual housing starts in Ontario could fall to around 40,000 units by 2030, roughly half the recent average. - The Canada Mortgage and Housing Corporation (CMHC) forecasts that new home construction in major Ontario markets will decline through 2028 due to high building costs, weaker demand, and a large inventory of unsold homes. - Proponents argue that a temporary HST holiday would directly lower the purchase price for consumers, as the rebate would go to the homebuyer, not the builder. They project this could protect up to 100,000 jobs and over $8 billion in government revenues. - Critics of sales tax holidays argue they are often an ineffective policy tool that can simply shift the timing of consumer purchases rather than stimulating new demand. They also contend that the lost tax revenue must eventually be recovered elsewhere, potentially through higher taxes in the long run.
