Chamber Policy and Positions 2007
CHANGES TO THE GST NEW HOUSING REBATE
With the introduction of the GST, the federal government made a commitment to adjust the thresholds on New Housing Rebates "at least every two years" to ensure that they continued to reflect changes in housing prices, and thus to protect housing affordability over time, in all parts of Canada.
To date no adjustments have occurred and currently many new home buyers do not qualify for the full GST New Housing Rebate or indeed may not receive it at all.
The GST New Housing Rebate provides a refund of 36% of the GST paid on new homes priced below $350,000. The rebate is phased out for new homes priced between $350,000 and $450,000. There is no rebate for new homes priced above $450,000. The $350,000-$450,000 thresholds have remained unchanged since the GST was introduced in 1991.
The failure to index GST rebate thresholds has eroded housing affordability across Canada, with homebuyers in larger, high-cost centres particularly disadvantaged. At the same time, the federal government has received, in 2006 alone, some $180 to $220 million in additional GST revenue from new homebuyers.
Housing affordability has eroded due to the lack of indexation of the thresholds.
For example in Vancouver, 97.5% of the purchasers of new single-detached homes do not qualify for the full GST housing rebate. Put another way, less than 3% of the purchasers of new houses in Vancouver qualify for the full GST housing rebate. In contrast, in 1991, when the GST was introduced, less than one-quarter of the purchasers of new houses built in Vancouver did not qualify for the full rebate - over 75% of new houses qualified for the full rebate.
In Toronto, 70% of the purchasers of new houses do not qualify for the full GST housing rebate. Only 30% of the purchasers of new houses qualify for the full rebate. In 1991, the figures were virtually reversed in Toronto: one-third of the purchasers of new houses did not qualify for the full rebate; two-thirds qualified for the full rebate.
The negative impacts on housing affordability extend beyond Vancouver and Toronto. The failure to index rebate thresholds means that as many as one-third or more of the purchasers of new houses in communities such as Kamloops do not qualify for the full rebate. Significant proportions of new home buyers in other centres also do not qualify.
In 1991, by contrast, the vast majority (in most cases, close to 100%) of the purchasers of new houses in virtually all centres qualified for the full GST housing rebate.
It is not only new home buyers who are disadvantaged by the lack of indexation of the thresholds. Because new and resale homes are similar, competitive, products, the higher (GST-included) prices of new housing are reflected in higher prices in the resale market as well. Overall the public ends up paying more.
RECOMMENDATIONS:That the federal government act in the next Budget on an outstanding commitment to adjust the rebate thresholds to reflect new housing price increases by setting the thresholds for 2006 at $475,000-$610,000 with an automatic yearly adjustment relative to the Statistics Canada New House Price Index.
SUBMITTED BY: Kamloops Chamber, West Shore Chamber and Greater Victoria Chamber
