Developer announces plan to build 5,000 rental homes after GST dropped

Developer announces plan to build 5,000 rental homes after federal decision to drop GST on construction costs

January 22, 2022 construction update: Oakridge Park (Oakridge Centre), Vancouver. (Kenneth Chan/Daily Hive)

There are some positive signs the federal government’s barely week-old decision to remove its GST from the construction cost for secured purpose-built rental housing is working as intended.

Dream Unlimited, a major real estate developer based in Toronto, reaffirmed its plan today to build 5,000 new purpose-built rental homes in urban centres across Canada, specifically in Toronto, Ottawa, Saskatoon, and Calgary.

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These sites already have approvals in place, but the federal government’s expansion of the existing GST rebate on secured purpose-built rental housing to 100% of the federal tax means the projects will not face further delays or even cancellation.

Amidst escalating costs in construction materials, equipment, and labour, along with high borrowing costs for construction financing due to the Bank of Canada’s elevated policy interest rate, rental housing projects across the country — which carry lower margins compared to strata ownership condominiums — are increasingly at risk of cancellations or even delays until market conditions improve. In some cases, developers are even switching their projects from rental housing to condominiums for the improved pro forma.

The removal of the GST from the equation means such projects would see up to a 5% decrease in costs. A $100 million project, for example, would not cost an extra $5 million due to the federal tax.

“This legislation is a game changer for the development industry, and more importantly for Canadians. The housing crisis has impacted every urban centre from coast to coast. What this legislation unlocks is our ability to get shovels into the ground quickly at a time when it’s never been more critical to build new homes,” said Michael Cooper, president and Chief Responsible Officer of Dream Unlimited, in a statement.

Dream Unlimited now has plans to move forward with shovel-ready projects totalling 1,350 rental homes over the next six months, including 1,010 units in Ottawa, where 43% of the units will be deemed affordable. The developer’s first wave of rental homes in Ottawa is in partnership with the not-for-profit Multifaith Housing Initiative of Ottawa.

Another 340 rental homes are also eyed for Saskatoon during this period.

Over the longer term, by 2025, the developer will proceed with another 3,700 units across all four markets.

Federal minister Sean Fraser stated earlier this month the expanded federal GST rebate could catalyze 120,000 new secured rental homes within the Greater Toronto Area alone over the next 10 years, according to some estimates.

This policy effectively expands the existing GST Rental Rebate from 36% to 100% and removes the current GST Rental Rebate phase-out thresholds for purpose-built projects with units valued between $350,000 and $450,000.

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