We’re Overlooking One [of the Simplest] Ways to Help Increase Affordable Housing Supply

Canada and Ontario have made meaningful progress in responding to the housing crisis. Recent announcements to remove HST on new housing are a step in the right direction, helping to stimulate development, keep the construction industry busy, improve project viability, and, hopefully, create a real reduction in total borrowing. As the Vice Chair of the Lanark Leeds Home Builders Association, I am proud of the work the Ontario Home Builders Association has done to advocate for recent changes to HST, and I know this will help some Canadians while keeping our construction industry busy.

But as someone who works primarily in the development of affordable and adequate housing, I always look at where policy could have gone, perhaps just one step further, to help all builders of housing. Over the last several months, I have spent significant time and energy speaking with policymakers to advocate for narrowly focused, necessary policy changes to stimulate and support more affordable housing development within the non-profit sector. With the recent announcement on HST, I felt the policy was narrowly focused on one part of the sector, and that it was an opportunity to support the entire development sector equally.

There is a critical gap in how tax policies are developed and applied. HST is one policy that is quietly limiting the ability of experienced nonprofit housing providers to scale supply. It is echoed throughout the industry and community of affordable housing providers; more needs to be done for them for the desperately needed affordable, adequate housing supply to be built.

Today, many nonprofit organizations delivering affordable and supportive housing are not able to fully recover HST on new development. While recent federal and provincial measures provide full HST relief for eligible purpose-built rental housing, a significant number of nonprofit projects do not meet the program’s criteria or cannot practically access it due to their structure, funding arrangements, or service model.

Instead, these organizations rely on the Public Service Bodies rebate, recovering only a portion of the HST paid on both new housing development expenses and operational expenses. This leaves approximately 3.94% of the total project and operating costs unrecoverable.  This is a gap that is continuously overlooked, but if filled, would have the right kind of impact to help these organizations that we need to be the ones building housing and increasing their services to do more.

Here’s how the math on new rental housing development is playing out [this is based on several years of sitting in on tax meetings with clients, our current housing we are building for new and existing operators, and for private-sector clients]. I am not a tax expert, and this should not be taken as tax advice*

Example is based on a $10 million project (with HST, $11,300,000.00)

Private-sector organization building new rental supply; 100% HST rebate, resulting in the project costing $10 million (after rebates are filed). The proponent will have to cashflow the HST in the interim.

A new non-profit organization aiming to build its first project and not currently receiving operational subsidies; we are seeing 100% HST rebate. This results in the project costing the same as it would in the private sector (assuming construction costs are applied equally...), and similarly, the organization will need to find ways to cover the HST in the interim (a thought on a solution here is for another time).

Existing non-profit organization building their 10th, 100th, + project with ongoing housing operations supporting Canadians across a range of housing services, as well as providing deeply affordable (and a broad range of affordability); 9.06% HST rebate [ 50% of federal, and 82% of provincial], not the full 100% of the 13% tax. This proponent will need to cashflow the HST on the interim and not receive the same benefit as the others will, as listed above.

What does the above actually do? Make it harder for existing organizations to build the kind of housing many Canadians need.  Does this not seem a little bizarre? Our current tax policy environment makes the existing, proven, experienced operators actually pay 3.94% more to build housing than private for-profit and brand-new organizations.

This is not a marginal issue. It is a structural inefficiency.

Nonprofit housing providers are among the most experienced and reliable builders of affordable housing in Canada. They have established governance, operational capacity, and a mandate to deliver long-term affordability. Yet under the current system, many are effectively penalized relative to private-sector developers whose projects more easily align with rebate criteria. Should we not at least be making the rebate equal?

The objective we need to stay focused on is to increase the adequate supply of new housing, particularly affordable and deeply affordable housing. Policy should prioritize enabling those already delivering it at scale, not making it harder than for other players.

A targeted solution is available: extend full HST relief to all nonprofit-led affordable housing developments, regardless of project structure, provided they meet clear affordability and public-benefit criteria. This would be a narrowly scoped change with immediate impact. It would reduce project costs, improve financial feasibility, and allow existing providers to reinvest capital directly into new supply.

At a time when governments are investing billions into housing, leaving this issue unaddressed is a missed opportunity. Sometimes, the most effective solutions are not new programs but fixing the gaps within the ones we already have.