Ontario and the federal government have introduced a series of financial incentives aimed at stimulating purpose-built rental construction. For developers evaluating rental projects in 2026, understanding which incentives are available — and what the technical conditions are — is essential before finalizing project pro formas.
HST Rebate on New Rental Construction
The 13% HST rebate on new purpose-built rental residential construction remains one of the most significant financial incentives available. The rebate effectively removes HST from the cost of construction for qualifying rental projects, representing a substantial reduction in hard costs for projects that meet the eligibility criteria.
Key eligibility conditions include: the units must be held for rental for a minimum period, the project must meet CRA's definition of purpose-built rental, and the application must be properly documented. Developers should confirm eligibility early in the project — ideally before tendering — rather than assuming eligibility after construction begins.
Development Charge Reductions for Rental
Many Ontario municipalities have introduced Development Charge (DC) reductions for purpose-built rental housing. These reductions vary by municipality but can reach up to 25% of the applicable DC for rental units. Some municipalities have extended this to 50% in specific zones or for specific unit types (e.g., affordable rental, family-sized units).
The DC reduction landscape is changing quickly. Before relying on a specific number in your pro forma, confirm the current bylaw with the municipality — DC bylaws are updated regularly and the rental discounts are not always permanent.
CMHC Financing Programs
CMHC's MLI Select and Apartment Construction Loan Program (ACLP) offer low-rate financing for purpose-built rental projects. Access to these programs often requires meeting specific criteria around affordability, accessibility, or energy efficiency — criteria that have engineering implications for the building design and systems.
Developers pursuing CMHC financing should engage their engineers and architects early enough to confirm that the design meets the program requirements before the financing application is submitted. Retrofitting a design to meet CMHC criteria late in the process is expensive and time-consuming.
The Technical Side Still Has to Work
Financial incentives improve rental project economics, but they do not reduce the technical complexity of getting a project through municipal approvals. FSR and SWM requirements, servicing capacity constraints, and CA permits apply equally to rental and condominium projects. In markets where infrastructure capacity is constrained — as it is in many Ontario municipalities — the servicing analysis remains the critical path item regardless of the incentive structure.