A Comeback for Purpose-Built Rentals?

The housing affordability crisis in Canada has sharply increased the demand for rental housing, yet not enough apartments are being built. Developers often favour condominiums due to quicker returns and easier financing, leading to a lack of incentive to construct purpose-built rentals. Historically, government incentives have been the driver of apartment developments, and governments are now stepping in again to address rental housing demands. The Ontario government is eliminating the eight per cent provincial portion of the Harmonized Sales Tax (HST) on new purpose-built rental housing to alleviate the housing crisis and stimulate rental home construction. Combined with the Federal New Residential Rental Property Rebate, this measure eliminates the full 13% HST on qualifying projects with no cap. This change, applicable to projects starting between September 14, 2023, and December 31, 2030, and completed by December 31, 2035, offers financial incentives for developers. These rebates mark significant shifts in the housing market, as the previous Ontario HST rebate was capped at $24,000 but is now uncapped, providing millions of dollars in tax relief to purpose-built developments. As an example, for just one two-bedroom rental unit valued at $500,000, these measures would lower the cost of construction by $25,000! Seeing as these government incentives are transient, developers are moving quickly to harness government aid and demand to build purpose-builts that not only drive profit, but foster social and economic growth. So, is now the time to be building purpose-builts?