Moffatt: don't limit GST rebate to first-time homebuyers
Expanding to all owner-occupied new homes would cost $2B/year
Toronto’s Housing Collapse Will Cost Governments $6.6 Billion a Year. Missing Middle Initiative, July 2025.
"Room To Be More Bold": Why We Need To Expand The FTHB GST Rebate. Teagan Sliz, Storeys, June 2025.
Canada’s GST Rebate is Based On 1991 Home Prices - WTF!?! Missing Middle Initiative podcast, June 2025. Includes transcript.
The PBO’s Math Is Clear: We Need an Expanded GST Housing Rebate. Missing Middle Initiative, June 2025.
This One Tax Fix Could Instantly Drop New Home Prices in Ontario by $100,000. Missing Middle Initiative, June 2025.
Mike Moffatt and the Missing Middle Initiative have been talking about this for quite a while.
There’s been a GST rebate for new owner-occupied housing ever since the GST was introduced in 1991. The rebate was worth 36% of the GST paid, phasing out for homes from $350,000 to $450,000. Those thresholds made sense back then, but they’ve never been raised!
In October 2024, Moffatt proposed increasing the thresholds to $1 million and $1.5 million, while keeping the rebate at 36% of GST paid, at a cost of $1.7 billion. Raising threshold for GST on new homes.
What’s actually implemented: as of May 27, there’s a First-Time Home Buyers’ GST Rebate on new homes up to $1 million, phasing out up to $1.5 million. Backgrounder with details - it only applies to sales agreements after May 27. Unlike Moffatt’s proposal, it only applies to first-time homebuyers. For example, if you’re a senior who wants to downsize to a new apartment, the GST rebate wouldn’t apply.
Moffatt observes that the current policy only applies to about 13,000 homes per year, or about 5% of homes built each year, which is not enough to make a significant difference. He recommends that the policy be expanded to include all new owner-occupied homes (about 60,000 to 65,000 homes per year), at an additional cost of about $2 billion/year. The PBO’s Math Is Clear: We Need an Expanded GST Housing Rebate.
In Ontario, Doug Ford is open to waiving the provincial portion of the HST if the federal government waives the federal portion. This would immediately save $100K on a $900K home. This One Tax Fix Could Instantly Drop New Home Prices in Ontario by $100,000.
Note that part of the cost would be offset by more homebuilding, which would result in more tax revenue. If the federal and provincial governments do nothing: Toronto’s Housing Collapse Will Cost Governments $6.6 Billion a Year.
When there’s a lot of desperate sellers, they can’t raise their prices
GST cut for new homebuyers could mean price hikes, bank warns. Simon Tuck, National Post, June 2025. Based on a report by Kari Norman at Desjardins.
I'm just a layperson, not an economist, but this doesn’t make sense to me. In Toronto and Vancouver, developers have stacks of unsold condos sitting on the shelf because interest rates are sharply higher and potential buyers can't afford them. They can't lower their selling price below their costs, so they're desperately holding on, hoping for interest rates to come back down.
When you've got a zillion desperate sellers, who's going to be crazy enough to raise their prices?
Indeed, if you look at the underlying report, that’s what Kari Norman is saying:
While the policy is intended to improve affordability, in the near term it may instead inflate prices or compress inventory, at least temporarily, if not paired with supply-side supports for meaningful increases in the amount and pace of construction. That said, this may be the perfect time to introduce the FTHB GST Rebate. With condo presales currently soft, particularly in formerly hot housing markets like Toronto, any potential surge in demand may do more to sop up excess inventory rather than reignite price inflation.