The Residential Construction Council of Ontario (RESCON) is applauding the federal government’s passage new legislation that will eliminate the GST for first-time home buyers on some new homes.

Bill C-4, the Making Life More Affordable for Canadians Act, received Royal Assent on March 12. The new law scraps the GST for first-time buyers on homes priced at $1 million or below, and reduces it for those buying homes valued between $1 million and $1.5 million.

“While it took a long time to get here, the passage of Bill C-4 is extremely welcome news,” says RESCON president Richard Lyall. “Eliminating the GST for first-time buyers on new homes will make a meaningful difference for purchasers and help revive the new home market which has suffered greatly over the past couple of years. This has the potential to kick-start much-needed residential construction.”

RESCON expects the legislation will help improve housing affordability and stimulate new home construction at a time when the sector is facing severe economic headwinds.

“The timing of this legislation is critically important,” said Lyall. “Without swift passage, many potential buyers would have delayed their decisions over the summer, which would have further weakened an already fragile housing market. This will help kick-start the market.”

Ontario’s housing sector has been grappling with declining housing starts, falling new home sales and mounting job losses. Recent analysis commissioned by RESCON shows the situation could worsen without decisive action. The decline in housing starts has already translated into more than 35,000 fewer person-years of employment compared with recent years.

“We have been sounding the alarm for some time that the housing market is deteriorating rapidly,” said Lyall. “Projects are being shelved, sales have stalled, and job losses are mounting across the industry. Measures like the GST elimination, which we have been pushing for some time, are exactly the type of action governments need to take to restore confidence in the market.”

RESCON says taxes, fees and government levies account for roughly 36 percent of the cost of a newly built home. It is calling for governments to look at this tax burden even further.

Earlier, Ontario announced it would be reducing its eight-per-cent provincial portion of the HST for first-time buyers of new homes once the federal initiative was passed. That means a first-time buyer of a new home will qualify for a combined total provincial and federal rebate of 13 percent.