Where oh where has the FTHB rebate gone?

By Leor Margulies
Robins Appleby LLP

It has been almost 10 months since the federal and Ontario governments announced the First-Time Home Buyer (FTHB) rebate, effective for all purchase agreements entered into on or after May 27, 2025. As everyone knows, the FTHB will be available only to first-time homebuyers (buyers who have not owned a home in the year of the purchase or four years before), and are purchasing homes up to $1.5 million. The full rebate of the HST is available for homes up to $1 million, then gradually reduces to zero when the purchase price becomes $1.5 million. The OHBA, BILD, the Large Cities Alliance of major Canadian cities and CHBA (even though a little bit late to the game), recognized that the FTHB will do little to stimulate new housing sales and construction activity for a variety of reasons. These organizations spearheaded efforts with Ottawa and Queens Park to address a variety of issues:

1. 1. The FTHB needs to be expanded to all purchasers, not only first-time homebuyers as per the Conservatives platform. First-timers make up a very small percentage of the market, probably less than 10 per cent, and the FTHB will do little to stimulate a larger response from others looking to buy new homes.

The Federal Government mistakenly viewed, at least in May 2025, the housing problem as strictly a problem of over supply of condominiums in GVA and the GTA. That of course is partly true, but the breadth of the housing recession is far greater than that. Most major cities, except for perhaps Montreal, have suffered significant new home sale declines. The level of new housing sales in Calgary, Vancouver, Toronto and Ottawa have dropped to near 10- or 20-year lows. The impact of creating a lack of supply and a loss of construction jobs over the next several years, will be severe as a result.

1. 2. The FTHB rebate reduces for sales with purchase prices in excess of $1 million to nil at $1.5 million. That means people who buy a new home priced higher than $1.5 million get no rebate whatsoever, and in that spread between $1.5 million and $1 million, get less than those purchasers buying for $1 million or less. The current housing rebate, which totals $24,000 is available to all new-home buyers, irrespective of the purchase price.

The governments must remove this restriction and make all housing rebates (maxed out at $130,000) available to all new home purchasers. Reducing the purchase price of a home that is say, $1.8 million, will certainly go a long way to making it more affordable, particularly in the GTA.

1. 3. Because the draft legislation, regulation and forms have not been tabled yet, there is a great deal of uncertainty as to how the evidence will be provided by purchasers to vendors to establish that they qualified as first-time home buyers. If FTHB qualification is removed, then the problem goes away; however, if it is not eliminated, the question remains as to what will be required, such as a statutory declaration or a certificate. More importantly, will vendors who receive assignments of this rebate be taking the risk that the purchaser lied about his or her eligibility and end up with a large HST reassessment. Under the current regime, vendors do have an exposure when receiving the assignment of the housing rebate and seeking an ITC credits on their HST returns in the event that the purchaser is not entitled to the housing rebate. If the same process would apply to the FTHB, vendors could be exposed to a much more significant reassessment. At least with the current eligibility requirements, vendors can at least confirm in condominiums as to whether properties are being rented or occupied and the amount the rebate on is much smaller. There is no way for vendors to verify whether a purchaser is an FTHB and given the significance of the rebate, the element of fraud could be significant.

If the FTHB remains, BILD and the Large City Alliance have requested that vendors should be allowed to rely on the certificates or statutory declarations of purchasers prescribed by CRA, for full protection, similar to the protection provided to purchasers by the delivery of a statutory declaration or certificate of the vendor under section 116 of the Income Tax Act for non-resident sales.

1. 4. No legislation or draft regulations have been provided to guide developers in respect of sales before the legislation is passed, whether it is for existing units or preconstruction units of low- or highrise projects. The only thing that has been provided has been a very unfortunate directive from the CRA that states new home sale agreements entered into after May 27, 2025 but before the legislation is passed, are not eligible to have the FTHB assigned to the vendor by the purchaser in the same manner as the current housing rebates are done. The purchaser is required to pay the full HST (unless the existing rebate) on closing and then apply for the rebate after closing.

As a result, either the vendor or the purchaser must take the risk that the FTHB legislation does not pass. Most cash-strapped purchasers would not have the financial ability to pay the extra HST on closing, and conservative vendors might shy away from this risk.

There are also rumours that the FTHB might, in fact, be expanded to all purchasers which would eliminate the evidentiary issue and would expand the pool of purchasers. However, until that happens, what are venders to do other than wait for the legislation to be passed in its current structure or in some expanded structure?  Here are some thoughts:

1. 1. • If the vendor is confident that at least the FTHB will be passed at some point, they could provide interim occupancy on a low- or highrise inventory unit and collect and occupancy fee equivalent to taxes, common expenses and mortgage interest on the balance due on closing. The vendor should, of course, get evidence that the purchaser can close by a mortgage approval or other financial evidence, and get the maximum deposit that they can. The agreement would have to be structured so that there would be extensions until such time as the legislation was passed, with some sort of sunset date. In the unlikely event that the legislation had not passed by that date, the purchaser will want to close, and the vendor will lose the rebate as it would have been built into the price to entice the purchaser to enter into the purchase agreement.
      • Some vendors have considered closing before the legislation is passed and securing the payment of the housing rebate by undertakings and a second mortgage on the new home. This creates its own set of problems as to how long the mortgage will last and whether it can go on, in light of the usual restrictions of an institutional mortgage.

The best solutions would be for both levels of government to:

1. Do away with the requirement for the purchasers being first-time homebuyers;
2. Allow all purchasers to earn the full assignable FTHB rebate based on a maximum purchase price of $1 million; and
3. Provide vendors with reassessment protection similar to section 116 of the ITA.

It is time for Doug Ford and Mark Carney to do the right thing for new-home buyers, for the housing industry and for all workers in that industry.

Leor Margulies is Real Estate Group Co-Head, Robins Appleby LLP. robinsappleby.com.