by Josh Clark 
A common question that we hear is about the GST rebates and whether or not GST is payable on MLI Select investments in Edmonton and Calgary. Here is a breakdown on how GST is impacted for multi family investment types in Alberta. Before diving in, we always recommend to do your own research and more importantly, verify everything with your lawyer or tax consultant.
Does GST Apply to MLI Select Investments?
To answer your question in short, yes, MLI Select projects typically qualify for the purpose built GST rebate covering 100% of GST costs. However, this may not apply to all MLI Select investment types! For example, single family homes on different property titles. Let’s dive into it.
In Alberta, the combination of Canada’s enhanced GST rebate for purpose-built rental housing and the CMHC MLI Select program is creating a transformative shift in the rental housing landscape. Both programs aim to combat Canada’s housing crisis by incentivizing the construction of affordable, energy-efficient rental properties. Let’s explore how these initiatives work together to reshape the future of housing in Alberta.
Enhanced GST Rebate for Purpose-Built Rental Housing
The latest government program to be released that impacts the GST for Multifamily investments in Canada is called the Purpose-built Housing Rebate. This came into effect on May 13, 2024 and allows for a 100% rebate on GST for purpose built housing in Canada. This offers significant advantages to developers and investors looking to invest in the CMHC MLI Select program in Alberta. Here’s how it works:
Key Features:
- 100% GST Rebate: This rebate eliminates the federal GST (5%) on qualifying projects.
- Eligibility:
- Multi-unit complexes with 4 or more private apartments or 10 or more private rooms.
- At least 90% of units must be long-term rentals (minimum 1 month).
- New constructions starting Sept 14, 2023 – Dec 31, 2030, with completion by 2035.
- Office-to-residential conversions are eligible.
- Exclusions: Condos, single units, duplexes, and substantial renovations are not eligible.
Financial Impact:
For example, a $500,000 unit could receive a $25,000 GST rebate under the new rules, compared to $0 under previous rules. When combined with Alberta’s lack of provincial sales tax, this creates a full 5% cost reduction for developers.
CMHC MLI Select Program
The CMHC MLI Select program focuses on promoting the development of affordable, accessible, and climate-friendly rental housing.
Key Features:
- 50-Year Amortization: This allows for longer loan repayment terms compared to the standard 25-30 years.
- 95% Loan-to-Value Ratios: Developers can secure financing with only a 5% down payment.
- Reduced Insurance Premiums: Eligible projects can receive up to 25% off insurance premiums.
Eligibility Criteria:
- Minimum 5 units (50+ for retirement homes).
- Point-based system based on:
- Affordability: Rent must be 20% below market rates.
- Energy Efficiency: Projects must meet ENERGY STAR® certification.
- Accessibility: Universal design features are required.
Investor Criteria:
- Investors must have 25% net worth of the property value and 10% liquid assets.
How These Programs Work Together in Alberta
When combined, these two programs provide powerful incentives for developers and investors. Here’s how the synergy works:
Combined Benefits:
| Factor | GST Rebate Impact | MLI Select Impact | Combined Effect |
|---|---|---|---|
| Upfront Costs | 5% GST savings | 5% down payment | 10%+ effective cost reduction |
| Cash Flow | $25k/unit tax relief | Lower premiums + 50-year amortization | Improved ROI by 15-20% |
| Project Viability | Makes mid-market units feasible | Enables larger portfolio growth | 30% more projects viable |
Alberta-Specific Advantages:
- No Provincial Sales Tax: Alberta offers full 5% GST savings versus partial relief in other provinces.
- High Demand Markets: Cities like Calgary and Edmonton need over 15,000 new units annually.
- Developer Incentives: Combining the 50-year amortization with GST savings enables:
- Lower break-even rents (e.g., $1,200 vs. $1,500 for a 2-bedroom).
- 20-30% faster construction timelines.
Case Example: Calgary Multi-Unit Development
Consider a 50-unit apartment project priced at $300,000 per unit:
- GST Savings: $750,000 in total (50 × $15,000 average per unit).
- MLI Select Benefits:
- 5% down payment vs. 20% conventional: $7.5M vs $30M equity required.
- 50-year amortization reduces payments by $12,000/month.
- Net Impact: This results in an 18% higher investor return.
Challenges & Considerations
While these programs offer significant advantages, there are a few challenges to keep in mind:
- Application Complexity: The GST rebate requires filing CRA Form GST524 with supporting documents. The MLI Select program requires 100+ page submissions including energy models.
- Timeline Alignment: The GST eligibility requires construction to begin by 2030, and MLI Select approvals can take 3-6 months.
- Market Risks: Rent control implications and interest rate sensitivity due to the 50-year terms need to be considered.
Future Outlook for Alberta’s Rental Market
According to federal projections, over 50,000 new units are expected to be built in Alberta by 2030 through these programs. Additionally, there are growing trends of solar integration and modular construction, which could reduce costs by 25%.
As Calgary real estate expert Mark Tuck puts it, “The GST/MLI combo turns marginal projects into 8-10% cap rate opportunities – a game-changer for Alberta’s rental market.”
With housing starts needing to double to meet demand, these programs will be crucial in helping Alberta achieve Canada’s 2030 affordability goals.
When and How to Apply for Your GST Rebate
Applications for the PBRH rebate are being handled through the Canada Revenue Agency’s (CRA) online platforms.
For GST/HST registrants, applications opened on May 13, 2024, and can be filed using My Business Account (MyBA) by selecting the existing GST/HST New Residential Rental Property Rebate Application (GST524). If you’re a GST/HST non-registrant, applications opened on June 17, 2024, and can be submitted through My Account (MyA) by also selecting the GST524 option. These online platforms make it easier for developers and investors to apply for the PBRH rebate quickly and securely.
Be sure to check the CRA’s instructions for your eligibility and required documentation to complete the application process efficiently.
Conclusion
For developers and investors, combining the enhanced GST rebate and the CMHC MLI Select program provides an unprecedented opportunity to build affordable, energy-efficient rental housing. These initiatives are key to reshaping the rental housing market in Alberta, offering both financial relief and long-term growth potential.
Make sure you reach out to us at New Homes Alberta for more information on whether or not your specific property or situation may be eligible for the GST rebate, and more importantly, check with lawyers and tax professionals before making any firm decisions on your investments!