P.E.I. 'going to look at' dropping provincial tax on new housing rental builds

The P.E.I. government is taking a close look at a federal government request that it remove the provincial portion of HST on new rental housing construction.

Speaking at the conclusion of a federal Liberal caucus meeting Thursday, Prime Minister Justin Trudeau said Ottawa would forego its portion of the HST on new rental construction until 2030. On that same day, federal Housing Minister Sean Fraser wrote to provincial housing ministers across the country asking them to follow suit.

"I urge you to match our ambition," Fraser wrote.

"The impact of the combined removal will kickstart home building and will help offset the impact of global inflation and higher interest rates that have caused builders to pause developments that have already been approved, and are awaiting construction."

The federal portion of the HST is five per cent and the provincial portion is twice that. Removing all of the HST could save developers $150,000 for every $1 million spent on construction.

Late Friday afternoon, P.E.I. Housing Minister Rob Lantz responded favourably to the request in an emailed statement.

"As a province, we hope to take this initiative a step further by looking at a complementary program to remove the provincial portion of HST on new rental builds," wrote Lantz.

But the tax holiday is far from a done deal.

Speaking to CBC News Friday afternoon, P.E.I. Finance Minister Jill Burridge said provincial staff began looking at the proposal immediately.

"If this is something that we identify as something that will absolutely contribute to affordable rental housing on P.E.I., then absolutely we're going to look at it," said Burridge.

"That's our goal. That's everybody's goal here."

But whether the province will determine dropping the tax is the best way to encourage new building remains in question. It comes down to balancing what it will cost the government in lost revenue against how much new building it might encourage.

Statistics Canada reports investment in apartment construction on P.E.I. in 2022 was $82 million, which would have brought in about $8 million in HST to the province.

P.E.I. Opposition Leader Hal Perry called the federal proposal a practical way to create more housing options for Islanders.