William Wright Report Q3 2023

William Wright Report Q3 2023: The Enhanced GST Rental Rebate: What Does This Mean for Real Estate Developers and the Rental Market?

November 3, 2023

On September 14, 2023, the Government of Canada announced the Enhanced GST Rental Rebate on new purpose-built rentals to help meet the demands of rental housing in Canada. This announcement was introduced in response to the calls for housing affordability and will result in the construction of much needed rentals.

In this new legislation, developers will receive a 100 percent GST rebate for new purpose-built rental housing, such as fourplexes, apartment buildings, student housing, senior residences, and buildings with at least 90 percent of all residential units designated for long-term rental. This enhancement is a temporary measure that will apply to qualifying residential units where construction of the building or addition begins after September 13, 2023, before 2031, and is substantially completed before 2036.

Legislation related to these changes has not been tabled yet. However, it is expected that the Excise Tax Act will be amended to allow for the new rebate. Prior to these changes, only non-profit organizations, co-operative housing corporations, public institutions, and charities were able to receive a full rebate of the GST on rental buildings, provided certain criteria were met.

This groundbreaking initiative incentivizes the construction of new rental apartments and will spur the construction of a significant number of rental projects that were on the fence. In some cases, this will also allow development numbers to become more feasible and reduce financial barriers. With higher construction costs as a result of global inflation, this was a necessary financial incentive for builders to proceed with projects that would have otherwise not gone forward.

This excitement is not met without concerns however, and there are still uncertainties regarding the eligibility for this rebate. The draft legislation states that the rebate is available if construction begins on or after September 14, 2023, but it does not disclose how the government will determine when construction will be considered to have begun or what qualifies as under construction.

Without clarification, it can be unfair that a project that just started construction on September 13 will receive no enhanced rebate, whereas a construction project starting on September 15 may get the full enhanced GST rental rebate even if it hits substantial completion. As multi-unit rental projects generally take a long time to finish, the government should consider extending the enhanced GST rental rebate to all projects where substantial completion occurs after September 14, 2023.

Nevertheless, any incentive for the construction of new rental housing is welcomed in the goal towards housing affordability. The removal of GST from new rental construction is a significant step in meeting the increasing housing needs of the rapidly growing population of British Columbia.

Written by Marianne DeCotiis for William Wright Commercial


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This communication is not intended to cause or induce breach of an existing agency agreement. E&OE: All information contained herein is from sources deemed reliable, and have no reason to doubt its accuracy; however, no guarantee or responsibility is assumed thereof, and it shall not form any part of future contracts. Properties are submitted subject to errors and omissions and all information should be carefully verified. All measurements quoted herein are approximate.