Ontario’s major savings for homebuyers

On March 25^th, 2026, Ontario announced a major proposal to eliminate the full 13% HST on qualifying new homes, potentially saving buyers up to $130,000. This represents a significant policy shift and seems to be a direct response to recent federal initiatives. The collaboration between Ontario and the federal government demonstrates a strong commitment to addressing housing affordability, especially for first-time buyers.

As part of the proposed 2026 Ontario Budget, the plan would fully waive HST on new homes priced up to $1 million and offer substantial rebates on homes priced up to $1.85 million. By reducing upfront costs, the program aims to help more buyers qualify for mortgages and access the housing market. While the proposal is not yet law, its level of detail and government coordination suggest it is likely to proceed.

The proposal involves both the Ontario and federal governments, with Ottawa sharing costs by covering the federal HST portion. Approximately $2.2 billion in joint tax relief is expected to be delivered, supporting housing construction and affordability across the province. This coordinated approach is poised to make a real difference in pricing and the structuring of new construction deals.

For buyers, the savings are significant, on a $900,000 new home, avoiding HST can save over $117,000. These savings could be put towards a larger down payment or help lower mortgage costs. The rebate’s sliding scale guarantees meaningful relief even at higher prices, potentially making it easier for many households to qualify for a mortgage.

Officials estimate the rebate could lead to 8,000 new homes being built next year, supporting up to 21,000 jobs and increasing Ontario’s GDP by $2.7 billion. Stimulating construction is seen as vital to meeting the province’s housing needs, especially in the GTA.

The rebate now applies to purpose-built rental housing by removing the 8% provincial HST portion for qualifying projects. This aims to increase rental supply amid low vacancies and rising rents, offering more options for those not ready or able to purchase.

Ontario has announced that the rebate will be available from April 1^st, 2026, to March 31^st, 2027. However, the province plans to align with the federal program’s effective date of March 20^th, 2025, for purchase agreements. This means buyers who sign agreements as early as March 2025 may be eligible, but final details (such as whether eligibility depends on the agreement date, closing date, or construction status) are still to be confirmed.

While the policy’s direction is clear, meaningful tax relief for new housing, the mechanics are not final. Buyers and professionals must weigh their options: delay or unwind transactions to gain more certainty, or proceed now, hoping that Ontario’s final rules will apply retroactively. Each approach carries risks and should be matched to the specific deal and risk tolerance involved.

While this approach will help increase the current housing stock, it does not address one of the root causes of the sluggish real estate market. First-time buyers are struggling to save due to the high cost of living. Although the government is allocating funds to build new homes, it should also offer incentives, such as allowing qualified first-time buyers to purchase newly built condominiums with zero down payment. This can be achieved by insuring the entire loan through CMHC. Many first-time buyers would prefer this option instead of paying rent.

This approach allows builders to sell their inventory swiftly and reinvest the earnings into new projects. It would boost the condominium market and generate revenue through land transfer taxes. Additionally, many tenants will transition to ownership, creating more available and affordable rental options for others.

The federal and provincial governments are on the right track. However, we need to see the actual outcome. Would that rebate lower housing costs, or would it be absorbed during construction?