Ontario developers and apartment builders are set to see one of the largest tax rollbacks tied to new residential construction in the province, a move some officials say could cut costs by as much as $200,000 per unit for new rental and condominium projects.
Under a federal‑provincial agreement, Ottawa and Ontario said they will cut municipal development charges and remove the full 13% harmonized sales tax, or HST, on many new residential units. Ontario estimates the measures will provide $2.2 billion in tax relief and support thousands of new housing starts.
“We’re tackling the housing crisis from every angle so we can build up housing supply and bring down costs for Canadians,” Prime Minister Mark Carney said in a statement.
The proposed legislation targets two costs that builders consistently point to as barriers to new apartment construction: upfront municipal fees and sales taxes built into project budgets and unit pricing.
Ottawa and Ontario said they will provide cost‑matching funds to support $8.8 billion in housing‑related infrastructure over 10 years. That funding will allow municipalities to reduce development charges by up to 50% for three years in communities covering about 80% of Ontario’s population, according to Carney's office.
Development charges are upfront municipal fees paid by builders to fund infrastructure such as roads, water systems and parks. CoStar News has previously reported that in high‑growth markets such as Greater Toronto, these charges can add tens of millions of dollars to large apartment projects and delay or derail construction.
Changes intended to create homes, jobs
The officials said the infrastructure funding will offset much of the revenue municipalities are expected to lose from lower charges, while cities will also be expected to participate in the reductions.
The agreement also removes the full 13% HST on new residential units priced up to $1 million, saving up to $130,000 per unit. That maximum rebate will also apply to units valued up to $1.5 million, before declining proportionally to $24,000 for units priced at $1.85 million and above.
Ontario estimates the tax measures will support about 8,000 additional housing starts next year, create up to 21,000 jobs and add $2.7 billion to provincial gross domestic product.
“Lowering the cost of building and getting shovels in the ground faster is how we protect Ontario,” Premier Doug Ford said in a statement.
Housing and Infrastructure Minister Gregor Robertson said the partnership is meant to clear obstacles to new construction. “This will mean more housing supply and more affordable homes,” he said.
The changes come as Toronto’s multifamily market shows signs of softening. Overall vacancy in the sector has risen to 3.9%, asking rents have eased from recent highs, and nearly 29,000 apartment units are under construction across the market, according to CoStar data. Moreover, multifamily project completions are expected to accelerate in 2026.
The housing measures are also linked to transit investment. Governments committed to advancing several major projects across the Greater Toronto and Hamilton Area, including the Ontario Line, multiple subway extensions and Hamilton’s light‑rail project.
A separate three‑way partnership with Toronto will advance the Waterfront East transit line, which is expected to support about 75,000 housing units across the eastern waterfront and the Port Lands.
The measures take effect for eligible purchase agreements signed as early as Wednesday and remain in effect through March 31, 2027. Ontario said further details on how development charge reductions will be applied, including qualifying municipalities and infrastructure projects, will be released in the coming weeks.