The Government of Ontario has announced a proposal to rebate the full 8% provincial portion of the Harmonized Sales Tax (HST) on new homes purchased by first-time buyers, marking one of the most significant housing affordability measures in the province in years. Announced on October 28, 2025, the initiative aims to reduce the cost burden facing those entering the housing market for the first time. The measure will apply to new homes priced up to one million dollars, while homes priced between one and one and a half million dollars will see a gradual phase-out of the rebate.
This proposal aligns directly with the federal government’s earlier decision to eliminate the 5% Goods and Services Tax (GST) on new homes valued up to one million dollars for first-time buyers, as outlined by the Department of Finance Canada. Together, the combined federal and provincial measures could reduce the overall tax burden on qualifying purchases by as much as 13%, producing total savings of approximately $130,000 on a one-million-dollar home.
The provincial government has framed this as part of its broader strategy to make housing more attainable for Ontarians and to encourage the construction of new homes, as well as to keep more young people and families in Ontario rather than losing them to more affordable provinces.
Policy Context and Implications
The structure of the rebate is consistent with the federal model introduced earlier in 2025, ensuring consistent eligibility criteria and minimizing administrative complexity for buyers and builders. To qualify, the purchaser must be a first-time homebuyer, and the home must be newly built, intended to serve as the buyer’s principal residence. The rebate is applied to the 8% provincial component of the HST, while the federal GST component is addressed under Ottawa’s program.
The combined effect of these measures represents a substantial reduction in tax exposure on new-home purchases at entry-level price points. In practical terms, this means that a buyer purchasing a newly built home for one million dollars could save roughly $80,000 from the provincial rebate alone, in addition to the $50,000 in savings from the federal rebate. For many first-time buyers facing high borrowing costs, this could significantly improve purchasing power and expand the pool of those able to qualify for financing.
The measure also carries broader macroeconomic implications. Ontario’s new-home market has been under pressure throughout 2025, with sales activity subdued and housing starts at multi-decade lows. By targeting the first-time buyer segment, the government is effectively trying to reintroduce momentum at the base of the market, where activity can have the strongest multiplier effect on both supply chains and employment.
Industry Response
The Residential Construction Council of Ontario (RESCON) has endorsed the announcement, describing it as both timely and necessary. In an official statement, RESCON President Richard Lyall commended Premier Doug Ford, Municipal Affairs and Housing Minister Rob Flack, and Finance Minister Peter Bethlenfalvy for introducing the proposal, calling it an important step in addressing the province’s housing affordability crisis. Lyall noted that first-time buyers make up roughly 35% of all new-home purchasers but have been “particularly hard hit” by record housing-cost-to-income ratios that have moved beyond historic norms.
Lyall also emphasized that the timing of the policy is critical, given the “grim” outlook for the residential construction sector. Housing starts in Toronto, he said, are approaching a thirty-year low, with new-home sales effectively stalled. He argued that the provincial move, especially when coupled with the federal rebate, will provide tangible relief to both buyers and builders. According to RESCON’s analysis, taxes, fees, and levies currently make up about 36% of the total cost of a new home in Ontario. Reducing that tax load, Lyall said, is the most direct way to improve affordability and to encourage the construction of more housing.
At a recent RESCON-sponsored housing summit, industry professionals identified taxation as one of the most significant barriers to building new homes; this rebate is a step toward lowering that barrier, although RESCON maintains that deeper reforms are still required. Lyall stated that the organization will monitor the impact of the measure and continue advocating for further structural changes to address the regulatory and fiscal constraints that continue to limit new supply.
Potential Impacts
The government’s goal is to stimulate both demand and supply by reducing taxes for those most likely to purchase newly built homes, thus enabling projects that might otherwise have stalled. For first-time buyers, the initiative directly lowers the upfront cost of ownership, while for builders, it may revive sales activity in price ranges that have been hardest hit by higher borrowing costs and economic uncertainty.
Ultimately, the success of the measure will depend on its implementation details and market response. If buyers and builders both benefit as intended, Ontario could see renewed construction starts and stronger buyer confidence heading into 2026. However, as RESCON has cautioned, tax relief alone cannot overcome the layered challenges facing the province’s housing system. The organization suggests it must form part of a coordinated set of policies, combining financial incentives, regulatory streamlining, and infrastructure planning, to restore balance between supply and demand in Ontario’s housing market.