Ontario is removing the full provincial portion of the Harmonized Sales Tax on new rental housing developments, the provincial government announced Wednesday.

The province said the eight-per-cent tax removal will apply to new purpose-built rental housing, including apartments, student housing and seniors’ residences.

Projects must have at least four units or 10 private rooms.

Eligible projects must begin construction between Sept. 14, 2023 and Dec. 31, 2030 and must be completed by Dec. 31 2035.

“There has never been a greater need to get rental housing built across the province,” Ontario Finance Minister Peter Bethlenfalvy said in a news release. “This is why our government is taking steps to tackle the housing crisis so that all Ontarians can have an affordable place to live.”

Adrian Rocca, CEO of the Toronto-based development firm Fitzrovia, called news of Wednesday’s announcement “a big first step” for the province to expand its housing plan.

“This is a long time coming, they did a really good job of engaging the private sector over the last nine months,” he told BNN Bloomberg in a phone interview Wednesday. “They did a really good job understanding what's going to bring institutional capital to the table, and so it was bold, decisive action, exactly what the industry needed.”

Rocca said his firm has 8,500 rental units in development currently and is “actively in the market” to expand.

“We're being very careful as to what projects we take on just given some of the headwinds that are happening in the market,” he said. “This announcement definitely creates more confidence in the asset class in the sector.”

The move represents an expansion of the province’s New Residential Rental Property Rebate, which rebated 75 per cent of the provincial HST up to $24,000. The new rebate includes the full provincial HST with no limit.

The federal government announced a similar policy move in September to cut GST from new rental builds.

Ontario said that under the program, a two-bedroom unit valued at $500,000 would now qualify for an estimated $40,000 in provincial tax relief and $25,000 in federal relief.

“Removing the provincial portion of the HST on purpose-built rental will make many rental construction projects, which have always been expensive and face tough economic circumstances, viable,” Jason Burggraaf, executive director of the Greater Ottawa Home Builders’ Association, said in a news release on the announcement.  

“That means more opportunity, choice and affordability in homes for residents across the province."

Rocca said the announcement represents upwards of $15 million in savings for a tower in downtown Toronto.