Supporting GST Reform: What Proposed Changes to the New Home Rebate Could Mean for Ontario Buyers

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As housing affordability continues to dominate national headlines, one proposed federal measure could offer immediate relief for many homebuyers: a full GST rebate on newly built homes priced up to $1 million. If enacted, this would represent a major update to Canada’s long-standing Goods and Services Tax (GST) housing rebate rules under the Excise Tax Act, and could mean thousands in direct savings for Ontario buyers.

At Rabideau Law, we support this potential reform. A streamlined, expanded rebate would directly reduce closing costs and promote access to more affordable, newly built homes, especially in markets like the Greater Toronto Area, where the average cost of a new-build often disqualifies buyers from receiving the full rebate under current rules.

We also believe the Province of Ontario should follow suit. The provincial portion of the HST New Housing Rebate, which currently uses similar price thresholds, should be updated in tandem to reflect today’s pricing realities. Without provincial alignment, buyers could still face substantial closing costs even if the federal portion is modernized.

Current Law: How the GST New Housing Rebate Works

Under the Excise Tax Act, RSC 1985, c E-15, purchasers of a newly constructed or substantially renovated home may be eligible for a GST New Housing Rebate under section 254. The rebate refunds a portion of the 5% federal GST paid on the purchase of:

  • A new or substantially renovated owner-occupied home;
  • A new leasehold interest in land;
  • Or the construction/renovation of a home on land you already own.

To qualify, the home must be used as the primary place of residence by the purchaser or a close relative.

Under current law:

  • Homes priced $350,000 or less (before tax) qualify for the maximum federal rebate of 36% of the GST.
  • Homes priced between $350,000 and $450,000 are eligible for a partial rebate on a sliding scale.
  • Homes priced above $450,000 are not eligible for any federal GST rebate.

The provincial portion of the HST rebate in Ontario follows a similar structure, offering a 75% rebate of the Ontario portion of the HST (up to $24,000) but capping eligibility at $350,000 with a sliding scale up to $450,000, beyond which the provincial rebate is eliminated entirely.

How Much Could Buyers Save?

Let’s compare potential scenarios for a buyer purchasing a new-build home at $749,000:

Under Current Rules:

  • GST (5%): $37,450
  • Rebate: $0 – not eligible (over $450,000)

Under Proposed Federal Reform:

  • GST (5%): $37,450
  • Rebate: $13,482 (36%)
  • Savings: ~$13,500

If the provincial government matched this structure:

  • Ontario HST portion (8%): $59,920
  • Full 75% rebate (up to $24,000) applied to homes up to $1M
  • Buyer would receive an additional $24,000 rebate on top of the federal portion

Total savings if both levels align: potentially over $37,000 on a $749,000 purchase—an amount that could cover legal fees, land transfer tax, and closing adjustments entirely.

Why the Current Rules Are Outdated

The existing thresholds were introduced in an era when $450,000 could buy a fully detached home. In 2024, the average price of a new home in Ontario, particularly in major cities like Toronto, Kitchener-Waterloo, or Ottawa, often exceeds $800,000. Even townhouses and starter condos now fall outside the rebate range, effectively excluding the very buyers these rebates were designed to support.

Without an update, the HST system penalizes affordability: new homes come with a full 13% HST burden, while resale homes are exempt. This discourages new development and disproportionately affects first-time buyers who are looking at newly built entry-level housing.

Rabideau Law’s Position

We fully support the proposed federal reform to extend the GST New Housing Rebate to homes priced up to $1 million. It reflects a much-needed modernization of the Excise Tax Act and would bring the rebate system in line with today’s housing market.

We also call on the Province of Ontario to update the provincial rebate structure to match the proposed federal changes. Without provincial alignment, buyers will still face significant closing costs and financial uncertainty, even under a revised federal framework.

What Buyers Should Know

If these changes are adopted, buyers of homes of up to $1 million will benefit from:

  • Predictable and accessible rebates, removing the current sliding scale;
  • Lower closing costs, which can improve mortgage qualification ratios;
  • Faster financial decision-making for builders and purchasers;
  • Legal clarity, especially in pre-construction agreements.

But until changes are formally passed and proclaimed, buyers must structure agreements carefully. At Rabideau Law, we review builder contracts to ensure buyers are protected regardless of whether the rebate changes move forward.

Buying Pre-Construction? Let’s Talk Strategy

We offer:

  • Pre-construction contract review
  • HST/GST clause guidance
  • Flat-fee closing packages
  • Virtual signing across Ontario

info@rabideaulaw.ca | www.rabideaulaw.ca | 519.957.1001

Three images side-by-side, a photo of the post WWII federal housing involvement, followed but the 1960s-1980s and the 1990s pullback.

Will Build Canada Homes Be Any Different?

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The new Build Canada Homes initiative signals a return to direct federal participation—on public land, with federal coordination and financing, and through partnerships with private builders. While the details are still emerging, the core promise is bold: to double the country’s homebuilding output.

But will it work?

The answer depends on several key factors:

1. Scale and Coordination

The postwar programs worked because they were nationally coordinated and locally executed. If the new initiative fails to work seamlessly with provincial approval processes or municipal zoning, it could get bogged down—especially in Ontario, where local red tape is a known issue.

2. Speed of Delivery

In the current market, timing matters. Even if funding is secured and land is allocated, homes take years to approve and build. If the rollout is too slow, it risks missing the window where it could actually cool demand or meaningfully expand supply.

3. Market Response

There’s a risk of oversaturation in areas where public housing projects are concentrated—especially if units are not aligned with actual buyer preferences or if resale and rental conditions are constrained. The private sector must remain engaged for mixed-use and economically diverse communities to thrive.

4. Execution Consistency

Unlike CMHC programs, which spanned decades, this initiative’s long-term viability depends on political continuity. If the next government scraps or underfunds the program, it may collapse mid-build—leaving unfinished homes and stranded buyers.

Legal Insight: What Buyers Should Consider

From a legal standpoint, federally-backed housing projects may come with unique contractual frameworks, particularly around tax treatment (e.g., GST/HST exemptions), restrictions on resale, or public-private development terms. Buyers considering participation in future Build Canada Homes projects should have their agreements of purchase and sale reviewed carefully, especially where affordability covenants or rebate eligibility is involved.

At Rabideau Law, we assist clients across Ontario with all aspects of residential and pre-construction purchases, including government-incentivized housing and layered title arrangements involving public land. Our role is to ensure that buyers remain protected, informed, and contractually sound in an evolving regulatory landscape.

Final Thoughts: Will It Work This Time?

History suggests that federal intervention can work—but only under the right conditions. Where past programs succeeded, it was because they were paired with strong local coordination, clear objectives, and long-term commitment. Where they failed, it was due to poor planning, top-down policies, or a lack of community integration.

If Build Canada Homes stays focused on enabling—not replacing—the private market, and removes key obstacles like zoning and approval delays, it could ease the supply crisis. But buyers should temper expectations: this is not a quick fix, and the legal and regulatory frameworks will need careful navigation.

Need legal guidance on pre-construction or public-private housing deals?
Connect with Rabideau Law to ensure your real estate purchase aligns with today’s—and tomorrow’s—housing policy shifts.

Serving clients across Ontario | Virtual closings available info@rabideaulaw.ca | www.rabideaulaw.ca

Small conceptual home on a table with a ribbon cutting in front of it.

Build Canada Homes: What the New Federal Housing Program Means for Ontario Buyers

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Canada’s housing affordability crisis is not new, but a new national initiative, Build Canada Homes, aims to tackle it head-on. Set to launch later in 2025, the program is part of a larger federal strategy to double the country’s annual housing output to 500,000 homes per year. The government plans to act as a developer itself, building homes directly on public lands, financing affordable projects at below-market rates, and fast-tracking modular and mass-timber construction across Canada.

This represents a major departure from Canada’s traditional reliance on municipal and provincial governments, and the private sector, to build housing. Instead, the federal government is stepping back into the role of housing builder, a position it hasn’t meaningfully occupied since the postwar period.

But while the ambition is bold, the execution will be everything. There are reasons to be optimistic, and many reasons to be cautious.

Why This Program Matters

One of the most pressing issues in the Canadian housing market over the last few years has been affordable supply. For years, demand has far outstripped new construction, particularly in population-dense cities like Toronto. However, interest rate hikes have dramatically cooled price growth and substantially increased temporary supply. But this is not a long-term solution and doesn’t solve the underlying problem: too few homes, especially in the affordable segment.

Build Canada Homes attempts to address that gap directly. If successful, it could not only increase housing availability but also improve affordability for first-time buyers, renters, and low- to middle-income families. It could also help stabilize the market by providing long-term inventory growth—something the private sector alone has struggled to achieve.

Potential Benefits for Buyers

One of the clearest advantages for homebuyers is increased access. More inventory means less competition and fewer bidding wars, particularly in overheated markets like Toronto, Kitchener-Waterloo, and Ottawa. That could put downward pressure on entry-level home prices.

Additionally, the proposed GST rebate on new homes up to $1 million—if enacted—could significantly reduce upfront costs for first-time buyers. This would make new construction

a far more viable option, especially in urban areas where older resale homes often require extensive renovation.

There’s also promise in the program’s use of modular and prefabricated construction methods, which could reduce build times and improve environmental performance. These homes can often be delivered more quickly and at a lower cost than traditional builds, offering a pathway to affordability without sacrificing quality.

Legal and Practical Risks to Consider

Despite its potential, the Build Canada Homes initiative is not without significant risks—particularly for buyers who may rush into the market without understanding the fine print.

First, there’s the issue of implementation lag. While the program may be announced in 2025, large-scale development takes time. Land assembly, zoning approvals, and servicing infrastructure are complex, often jurisdictional matters. Buyers expecting immediate relief could be disappointed if projects are delayed by red tape, intergovernmental conflict, or supply chain bottlenecks.

Second, there’s a question of market distortion. Injecting billions of dollars in subsidized financing into the housing sector could unintentionally distort pricing, crowd out private builders, or shift risk onto taxpayers if government-backed developments underperform or face financial shortfalls.

Third, buyers should be cautious about contractual terms in new-build projects. Builders working under public-private partnerships may impose unusual clauses related to construction timelines, cancellation rights, or HST/GST liability. Without legal review, buyers could find themselves on the wrong side of a one-sided agreement—especially if government policy shifts mid-project.

Finally, there is the risk of political and policy volatility. Major housing initiatives often change shape—or stall entirely—depending on economic conditions or electoral cycles. Buyers making decisions based on proposed rebates or eligibility criteria should ensure flexibility in their contracts and consider legal safeguards such as subject-to-clause protections.

What Buyers Should Do Now

For Ontario buyers, Build Canada Homes could unlock new opportunities—if approached with strategic foresight. Now is the time to prepare. Understand your rights and responsibilities in pre-construction purchases. Stay informed about changes to HST treatment on new homes. And most importantly, work with a legal advisor who can guide you through the complexities of new government-backed developments.

At Rabideau Law, we help clients navigate Ontario’s real estate landscape with clarity and precision. Whether you’re planning to purchase a new-build, considering an assignment sale, or exploring whether you qualify for an HST rebate, we provide the legal insight to ensure you close with confidence.

The Build Canada Homes initiative marks a rare moment of federal re-engagement in housing development. But like any major program, it brings risks as well as opportunities. The buyers who benefit most will be those who take a clear-eyed, informed approach to the changes ahead.

519.957.1001
info@rabideaulaw.ca
www.rabideaulaw.ca
Real estate closings across Ontario. Virtual services available.

Airbnb Conversion Triggers HST on Resale: A Cautionary Tale from the Tax Court of Canada

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A recent decision by the Tax Court of Canada has made it clear that turning your long-term rental into an Airbnb could trigger a significant and unexpected GST/HST liability on resale.

In 1351231 Ontario Inc. v. The King, 2024 TCC 37, the Court upheld a CRA assessment of over $80,000 in GST/HST, finding that a condominium unit—originally used for long-term residential rentals but later listed on Airbnb—no longer qualified as a “residential complex” under the Excise Tax Act (ETA). As a result, the subsequent sale of the unit was fully taxable.

This case underscores how seemingly small operational changes in the gig economy—like switching to short-term rentals—can result in major tax consequences.


The Facts

  • In 2008, the corporation purchased a used residential condo unit in Ontario, treating the purchase as HST-exempt, based on its intended use as a long-term residential rental.
  • For nine years, the condo was leased under a series of tenancies longer than 60 days—residential leases that are exempt under section 2, Part I, Schedule V of the ETA.
  • In 2017, the corporation began renting the unit out through Airbnb, typically for periods shorter than 60 days.
  • In 2018, the unit was sold, and the corporation once again claimed the sale was exempt from HST.
  • The CRA reassessed the corporation, arguing that the Airbnb use disqualified the unit from being a residential complex, making the sale taxable.

The Tax Court agreed with the CRA.


What Is a “Residential Complex” Under the ETA?

For a property sale to be HST-exempt under the ETA, it must qualify as a “residential complex.” This is generally true for used housing that has been leased long-term.

However, the ETA contains a critical exception: if the property is used as a hotel, motel, inn, boarding house, lodging house, or similar premises, and 90% or more of the use is for rentals under 60 days, then the exemption is lost.

The Court concluded that:

  • Airbnb use falls under “similar premises.”
  • The short-term nature of Airbnb stays meant “all or substantially all” of the use was for periods of less than 60 days.
  • Therefore, the unit no longer qualified as a residential complex.

But the real twist came from the corporation’s legal argument under section 197 of the ETA.


Section 197: The Corporation’s Argument—and Why It Failed


The corporation argued that even though short-term rentals occurred in the final year, they only made up a small fraction of the total use of the property during the entire time it was held. For nine years, the unit was used for long-term residential rentals, and only the last year involved Airbnb. Based on this, the corporation turned to section 197 of the ETA.


What Is Section 197?

Section 197 deals with changes in a property’s use after it has already been used in a commercial activity. Specifically, it provides rules for adjusting Input Tax Credit (ITC) eligibility and is used to apportion credits if a property is later used in an exempt activity (like long-term residential leasing).

The corporation claimed that section 197 deemed the entire use of the unit to be 100% exempt activity (i.e., long-term leasing), because that use predominated over the full ownership period. If this were accepted, the property would still qualify as a residential complex and the sale would remain exempt from HST.


Why the Court Rejected the Argument

The Tax Court rejected this interpretation for three reasons:

  1. Misapplication of Section 197’s Purpose
    Section 197 is designed to deal with adjustments to ITCs—not to recharacterize the nature of property use for the purpose of defining a “residential complex.” It governs the mechanics of credit allocation after a use change has occurred—not whether a property qualifies for an HST exemption on sale.
  2. Timing of Use Matters
    The ETA looks at the nature of use immediately prior to sale, not cumulatively over the property’s lifetime. Because the unit was being rented short-term via Airbnb when sold, that use was controlling.
  3. Section 206(2) Takes Precedence
    The first time the unit was offered on Airbnb constituted a “change in use” under section 206(2). At that point, the property transitioned to a commercial activity (short-term lodging), and the tax consequences followed. Once that change occurred, section 197 could not override it to retroactively deem the use exempt.


Key Takeaways for Property Owners and Airbnb Hosts

  • Airbnb = Commercial Use. Even partial or late-stage use for short-term stays can transform a property into a taxable asset under the HST regime.
  • Loss of Residential Complex Status. A property loses its exemption if 90%+ of its use is short-term—even if long-term use predominated earlier.
  • No Rescue via Section 197. This provision cannot be used to “wash out” the effect of short-term rental use prior to sale.
  • Watch for CRA Scrutiny. The CRA is actively auditing property owners for improper treatment of short-term rentals under both GST/HST and income tax legislation.


How Rabideau Law Can Help

Whether you’re listing a condo on Airbnb, planning a sale, or facing a CRA assessment, our team is here to help:

  • Analyze your property’s use and HST status
  • Assess potential tax exposure under the ETA
  • Structure transactions to minimize tax risk
  • Navigate CRA audits and respond to assessments

Before listing or selling a rental unit, talk to us. A quick consultation could save you thousands in unplanned HST liability.

Contact Rabideau Law today to protect your property and your bottom line.

*This article is provided for informational purposes only and does not constitute legal or tax advice. Please consult with a qualified professional to discuss your specific situation.*

Adverse Possession in Ontario: What Property Owners Should Know

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Can someone really take ownership of your land just by using it long enough? In Ontario, under specific conditions, the answer is yes. The legal doctrine of adverse possession—often dubbed “squatter’s rights”—remains valid, though its application has narrowed significantly in recent decades.

As courts continue to strictly interpret these claims, a recent case from 2025 provides a sharp reminder of the high bar claimants must meet.

What Is Adverse Possession?

Adverse possession allows someone who occupies land without legal title or the owner’s permission to eventually acquire legal ownership—if they meet very specific requirements under Ontario’s Real Property Limitations Act, RSO 1990, c. L.15.

To succeed, a claimant must show:

  • Open and notorious possession – visible and obvious to others, including the owner;
  • Exclusive possession – treating the land as their own, excluding others;
  • Continuous possession for at least 10 years; and
  • No permission from the rightful owner.

Case Spotlight: Harmur Investments Ltd. v. Pearce (2025 ONSC 628)

In this Ontario Superior Court decision, Harmur Investments Ltd. claimed ownership of land it had occupied for over a decade. However, the registered owner, Katherine Lillian Pearce, argued that she had given Harmur permission to occupy the property.

The Court agreed with Ms. Pearce and held that any form of permission—even informal—invalidates a claim for adverse possession. Harmur’s case was dismissed.

🔑 Takeaway: The requirement that possession be “adverse” or “hostile” is critical. Even implied permission will defeat a claim.

Can Adverse Possession Still Happen in the Land Titles System?

Yes—but only in very limited circumstances. While most Ontario properties are now under the Land Titles system (the electronic system), adverse possession remains possible only if the claimant completed the 10-year period of adverse possession entirely before the property was converted from the Registry system (paper system).

Once land is brought into Land Titles, any future adverse possession claims are barred unless the right was already “matured” under the old Registry system.

Key Rule: If the 10 years of adverse possession were not completed before the date of conversion to Land Titles, then the claim is barred—regardless of how long the land was possessed afterward.

Legal Guidance from Rabideau Law

Adverse possession is a rare but legally complex issue in Ontario real estate. Whether you’re: – A landowner protecting your boundaries, – A purchaser concerned about a neighbor’s encroachment, or – A party with a potential claim arising from long-term occupation,

Rabideau Law can help you assess the facts and protect your interests.

📞 Contact us to schedule a consultation with our real estate law team.