Incentivizing Residential Multi-Family Development in Canada

Incentivizing Residential Multi-Family Development in Canada: What Developers Need to Know

The landscape of Canadian housing markets has long grappled with the challenge of limited vacancy rates. Finally, political measures are in motion to address this pressing issue by incentivizing the construction of new rental housing stock. As the legislation progresses toward final approval, it’s crucial for developers to grasp the implications for the construction of new residential apartments.

Here’s a breakdown of key points that developers should consider:

  1. HST Rebates: The Provincial and Federal HST (Harmonized Sales Tax) on construction costs will undergo a significant change. While not a full 13% saving due to an existing rebate structure, the proposed adjustment will have a substantial impact by fully rebating the total 13%, offering a favorable alteration for new residential apartment construction
  2. Timeline for Construction: Projects must have commenced construction after September 14, 2023, and before December 31, 2030. Completion deadlines are set for no later than December 31, 2025.
  3. Qualifying Criteria for Units: To qualify, units must meet specific criteria:
    – Consist of four or more private apartment units (without shared baths, kitchens, or living spaces) or at least 10 private rooms (e.g., student residences)
    – 90% of the units must be designated for long-term rentals
  4. Conversions of Non-Residential Real Estate: Converting non-residential spaces, such as office buildings, into residential apartments will qualify if they meet the aforementioned criteria.
  5. Exclusions: Projects on leased land or within trailer parks will not be eligible, although pre-existing rebates will still apply.

Pending final governmental approvals, the proposed changes indicate the elimination of HST for a five-year construction window. This creates a favorable environment for the construction of long-term rental apartments and qualifying conversions in Ontario. While the devil is in the details, these measures represent a positive step towards bolstering the supply of residential multi-family apartments in the province.

The initiative to incentivize residential multi-family development in Ontario presents a promising opportunity for developers to contribute to the much-needed expansion of rental housing. By understanding and leveraging these incentives, developers can not only benefit from tax advantages but also play a crucial role in alleviating the housing shortage in the region.

For developers seeking suitable sites to leverage these incentives, exploring multiple-family opportunities becomes pivotal.

As a REALTOR® specializing in Commercial Real Estate, Patrick Hulley welcomes the opportunity to assist you further.

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