The Ontario government is preparing to remove the provincial portion of the harmonized sales tax on newly built homes in an effort to revive the struggling housing market.
Sources say the measure is expected to be included in the upcoming provincial budget to be presented later this month by Peter Bethlenfalvy. The move would expand an earlier program that offered a tax break only to first-time homebuyers.
If implemented, the change would allow all buyers purchasing newly constructed homes in Ontario to avoid paying the provincial portion of the HST, significantly increasing the scope of the existing policy.
The government first introduced the tax relief in its fall economic statement last year, allocating about $470 million over three years to help first-time buyers afford new homes. The provincial measure followed a similar initiative by the federal government that provided tax savings for first-time buyers purchasing homes valued under $1 million, with reduced rebates for properties up to $1.5 million.
However, the initial policy did not produce the increase in pre-construction sales the government had expected. Premier Doug Ford has since suggested expanding the program to all homebuyers in order to stimulate the housing sector.
Ford has said that limiting the benefit to first-time buyers did not significantly increase housing demand and that broader tax relief could help move the market forward.
Expanding the tax exemption to all new home purchases is expected to significantly increase costs for the provincial treasury. Industry sources estimate the policy could cost around $2 billion, compared with the $470 million allocated for the original program.
The potential expansion comes as the province prepares a record $236-billion budget while managing a projected $13.4-billion deficit. Ontario’s provincial debt is also expected to surpass $500 billion by 2027.
Despite fiscal pressures, the government is facing growing calls to take stronger action to support housing construction. Ontario has set a goal of building 1.5 million homes by 2031, but construction activity has lagged behind expectations.
Housing starts in the province totalled about 62,561 units in 2025, far below the levels needed to meet the government’s long-term targets.
Industry groups such as the Ontario Home Builders’ Association have argued that limiting the HST rebate to first-time buyers affects only a small portion of the market and have urged the government to remove the tax entirely for new homes.
The province has also been asking the federal government to expand its tax rebate program but appears prepared to move ahead independently if necessary.
Bethlenfalvy has said that improving housing supply is essential for economic competitiveness, job creation in construction and long-term affordability.
The government’s spring budget, where the expanded tax measure is expected to be announced, will be presented on March 26.