海角社区官网

Addressing the inequity that has crept into the Federal HST new home rebate program due to benign neglect is a key starting point for reform.

When the Goods and Services Tax (GST), now the Harmonized Sales Tax (HST), was introduced in the early 1990s, the federal government recognized the importance of home ownership to economic well being, and adopted a rebate program that lowered the taxation level of eligible new homes聽鈥� which directly benefited new home buyers.

The mechanism worked on price thresholds where homes below $350,000 were eligible to receive the full rebate amount, and those between $350,000 and $450,000 received a partial rebate and those over $450,000 received no rebate.

At the time of its introduction 聽to 鈥渞eview these thresholds at least every two years and adjust them as necessary to ensure that they adequately reflect changes in economic conditions and housing markets.鈥�

This commitment was reflective of two things. First, that housing prices would聽increase over time and second, the recognition that if price thresholds for the rebates were not indexed over time, then government revenues from home taxation would increase disproportionately from what was intended when the tax was designed. This would have a corresponding impact on housing affordability.

This commitment was never fulfilled. So, over the last 30 years while new home prices have nearly tripled, the price threshold levels for the rebate have never been indexed and federal sales tax revenues from the sales of new homes have soared. Now, due to price thresholds pegged at 1991 levels, virtually no new home buyer in the GTA qualifies for a rebate anymore and the federal government collects an extra $42,000 per single-family home in HST revenue on each new home sold in the GTA region.

Where is the inherent inequity you might ask? Let me explain further.聽

First and foremost, the Government of Canada made a commitment to its populace and then failed to follow through. This commitment was central to ensuring fairness and equity of the tax, and that, once implemented, it would not adversely impact the market and people’s ability to access housing within that market.

An extra $42,000 on a single family home may be a deciding factor when affordability is a concern.

Second, housing affordability is a generational inequality issue. Baby Boomers and Generation Xers form the majority of homeowners in Canada, as they accessed the property ladder when housing prices were lower and actually benefited from the GST rebate that provided assistance at the time for new home buyers.

In contrast, those struggling to enter the property market today 鈥斅爉illennials, Generation Z, and new Canadians 鈥� are facing much higher prices with a rebate mechanism that offers no assistance due to high property values in major markets across the country.

Lastly, because the rebate mechanism now interacts with property values, it has become geographically discriminatory. A new home buyer in New Brunswick, where property values are much lower, perversely qualifies for a rebate that provides some assistance, whereas a new home buyer in places like the GTA, Hamilton, London, Vancouver, where property values are higher, does not.

Not indexing rebate thresholds to reflect real-world property values means access to the program is not universal; it is entirely dependent on where one lives, creating inequities for residents in many regions聽and excluding those who could benefit the most.

Housing affordability is very complex, and indexing the HST rebate thresholds will only shave a few percentage points off the purchase price of a new home.

It is, however, one small part of a much larger dialogue that needs to take place on the taxation of new homes in this country.

Making this change to the HST rebate program will better the position the government to credibly lead that dialogue.