2026 Ontario Budget: Enhanced HST Relief on New Homes

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Overview

On March 26, 2026, the Province of Ontario introduced its 2026 Budget, which proposes a temporary enhancement to the provincial portion of the Harmonized Sales Tax (HST) New Housing Rebate and New Residential Rental Property Rebate. The measure is intended to improve housing affordability by increasing the amount of provincial HST relief available on qualifying new home purchases while preserving the existing rebate framework and eligibility rules.

Key Elements of Enhanced Rebate

• The enhancement applies to the provincial portion (8%) of the HST on new homes.
• Eligible purchasers may receive up to $80,000 in provincial HST relief.
• The enhancement applies to all eligible buyers, not solely first-time home buyers.
• For new homes valued at up to $1 million, the provincial portion of the HST is fully rebated (up to $80,000).
• For new homes valued between $1 million and $1.5 million, the maximum rebate is $80,000.
• For new homes valued between $1.5 million and $1.85 million, the rebate is reduced in a linear manner (from $80,000 to $24,000), and for new homes valued above $1.85 million, the existing $24,000 maximum rebate applies.
• Where a purchaser enters into an agreement to purchase a new home and qualifies for both the enhanced temporary rebate and the First Time Home Buyer Rebate, the rebate amount would be the greater of the two rebates, but not both.

Timing and Eligibility Requirements

• The enhanced rebate is proposed to be available for one year, from April 1, 2026, to March 31, 2027.
• The agreement of purchase and sale must be entered into during this period.
• Construction of the home must begin on or before December 31, 2028.
• The home must be substantially completed on or before December 31, 2031.
• The purchaser must acquire the home for use as a primary place of residence or as a new residential rental property.
• All other eligibility requirements under the existing Ontario HST New Housing Rebate and New Residential Rental Property Rebate remain unchanged.

Presumed Application of Enhanced Rebate

The Budget expressly characterizes this measure as an “enhancement” of the existing Ontario HST New Housing Rebate, rather than the introduction of a new or standalone rebate program. On that basis, it is reasonable to expect that the mechanics by which the rebate is delivered will be consistent with current practices.

Once the federal government passes legislation to amend the Excise Tax Act (Canada) to effect this enhanced rebate, we assume that the CRA will release a new form or update the existing GST 190 form to claim this rebate. A purchaser would still be able to contractually assign the rebate to the vendor and receive a credit for the amount of the rebate on final closing. Similar to the existing HST New Housing Rebate, the “net purchase price” for the new home sold to a qualifying purchaser would account for the rebate.

This presumption remains subject to confirmation through implementing legislation and administrative and CRA guidance. The rebate does not yet exist in law, and pricing and closing mechanics are to be determined once the Excise Tax Act (Canada) is amended and CRA guidance is issued.

Interaction With Federal HST/GST Relief

Ontario has indicated that it is working with the federal government to ensure the federal HST/GST relief complements the enhanced provincial rebate. If fully implemented, eligible purchasers of new homes valued up to $1.5 million could receive up to $130,000 in combined federal and provincial GST/HST relief.

Moreover, Ontario confirmed that federal regulations are still required to bring the provincial component of the First Time Home Buyer Rebate into force. Once those regulations are in force, the federal and Ontario First Time Home Buyer Rebate would be available for eligible purchasers who enter into a purchase agreement for a new home on or after March 20, 2025, and before 2031.

Limited Application Period and Anti‑Avoidance Considerations

The temporary enhanced rebate is expressly limited to agreements of purchase and sale for new homes entered into between April 1, 2026, and March 31, 2027. Purchase agreements executed outside this window are not eligible for the enhanced rebate.

While implementing amendments to the Excise Tax Act (Canada) have not yet been released, it is reasonable to expect that these will include anti‑avoidance provisions intended to prevent purchasers with existing agreements from terminating, re‑entering into, or amending those agreements solely to qualify for the enhanced rebate (similar to what was introduced with respect to the First Time Home Buyers rebate). As a result, purchasers and vendors should proceed on the assumption that attempts to re‑paper pre‑existing transactions to access the enhanced relief will not be effective.

The Real Estate Group at Aird & Berlis LLP provides full-service legal support on all aspects of real estate transactions, development and financing, including HST considerations, purchase and sale agreements, and regulatory compliance. Please contact the authors or a member of the team if you have any questions or require assistance.