Friday, April 23, 2010

Ontario's new building code demands greater energy efficiency

Changes made to the Ontario building code will require that all new homes built after 2011 must have an Energuide rating of 80 or greater.

The Energuide rating system rates a house based on its energy efficiency. A rating of 0 represents a home with major air leakage, no insulation and extremely high energy consumption. A rating of 100 represents a house that is airtight, well insulated, sufficiently ventilated and requires no purchased energy on an annual basis.

A new house built to current code standards in Ontario will typically rate between 65 and 72. A new home with some energy-efficiency improvements will rate between 73 and 79. An energy efficient house, such as one certified to the EnergyStar rating or R-2000 will rate between 80 and 90. A house that requires little or no purchased energy will have a rating between 90 and 100.

Furthermore, beginning mid-2011, the Ontario government plans to make the EcoEnergy audit mandatory for anyone planning on selling their home.

These changes will make energy efficiency a much more important part of the home buying decision, particularly if the difference in Energuide ratings between two homes can be converted into actual dollar savings - something Natural Resources Canada is working on.

If you are planning on building a house or buying a house on one of the many new developments springing up around Ottawa for possession after 2011, you should check with the builder what the Energuide rating of the house is. If it is too low, or worse, if they don't know it could end up costing you thousands of dollars in unplanned expenses to bring the house up to the Energuide 80 rating before you can take possession.

Brian Hobbs has written an interesting blog post on this issue. Check out his post EcoEnergy Energuide Ratings - Most New Homes Only Marginally Better Than 80's Homes.

Thursday, April 22, 2010

Getting a rebate on the provincial portion of the HST paid on your renovations in Ontario

As I mentioned in my previous post, many Ottawa home owners will not be able to claim the GST rebate offered when a home is substantially renovated or built new. That's because in many cases, it is unlikely that the new or substantially renovated home will be valued at less than $350,000 - the threshold to receive the full rebate from the federal government.
Fortunately, the provincial government is more realistic in its rebate program and starting July 1, 2010 all Ottawa home owners will be able to claim at least part of the provincial portion of the HST they paid to substantially renovate their home.

Unlike the federal program, the provincial program is based on the amount of money you spend to renovate, not the final value of the renovated house and land. The amount you receive depends on whether you paid HST on the purchase of the land.

Where the provincial component of the HST was paid on the land, an individual would be entitled to a new housing rebate of 75 per cent of the provincial component of the HST paid on qualifying construction expenses (including land), up to a maximum rebate amount of $24,000. Owner-built homes with qualifying construction expenses over $400,000 would qualify for the maximum rebate amount of $24,000.

Where the provincial component of the HST was not paid on the land, an individual would be entitled to a new housing rebate of 75 per cent of the provincial component of the HST paid on qualifying construction expenses (not including the land), up to a maximum rebate amount of $16,080 (i.e., 67 per cent of the maximum housing rebate of $24,000).

Here's how it breaks down for a renovation of up to $500,000.

Reno Cost PST paid Rebate Effective PST
$100,000 $8,000 $6,000 2.0%
$200,000 $16,000 $12,000 2.0%
$300,000 $24,000 $16,080 2.6%
$400,000 $32,000 $16,080 4.0%
$500,000 $40,000 $16,080 4.8%

That's good news for home owners renovating in Ontario.

For more information on this program check out Harmonized Sales Tax Information Notice 4 on the Ontario Ministry of Revenue website.

Wednesday, April 21, 2010

Getting a GST rebate on your renovation costs

If you substantially renovate your home or build a new one you may be eligible to receive a rebate of up to 36% of the GST you paid on goods and services to undertake the renovation.

Don't get too excited, however. There are conditions in place that effectively ensure most Ottawa home owners will be unable to claim this rebate.

First of all, you must substantially renovate your house. That means you must remove or replace at least 90% of the habitable interior. Basically, you would have to be undertaking a complete gut of the house, replacing all of the walls, electrical, plumbing and HVAC to qualify. You do not need to remove or replace foundation, roof or exterior walls to qualify, but if you do, they can count toward the 90%. Unfinished basements do not count as part of the habitable area for the purposes of calculating the percentage substantially renovated. If you basically tear down the existing house and build a new one, then you will also be eligible.

Second, the fair-market value of the house, which includes both the substantially renovated building and the land, must be less than $350,000 to receive a full rebate (i.e. 36% of the GST you paid). It's the fair-market value that is important here, not the cost of construction. If the fair-market value of the house exceeds $450,000 then you are not entitled to any rebate at all. And, if the value lies between $350,000 and $450,000 there is a formula to calculate the proportion of the rebate you are eligible for, which decreases to zero as the fair-market value approaches $450,000.

Unfortunately, the majority of Ottawa residents will never be able to qualify for the full rebate, if indeed they qualify for any rebate at all. You see, by the end of March 2010, the average price for a residential property in Ottawa (not including condominiums) was $354,698. With some exceptions, such as on the outskirts of Ottawa, it is hard to imagine the fair-market value of any substantially renovated or rebuilt house in Ottawa being less than $350,000.

If you are a condo owner, you might have better luck. The average price of a condominium in Ottawa in March 2010 was $240,409. That gives you some room, particularly if your condo is less than 1000 square feet. With average renovation costs running at about $100 per square foot, you could renovate 900 square feet of a 1000 square foot condo for about $90,000. If the pre-renovation value was $240,000, the completed fair-market value might still be below $350,000, entitling you to a full rebate (note that a full rebate is still only 36% of the GST paid).

Unfortunately, if you are reading this blog post from any other major centre in Canada, except Montreal, you have even less chance of qualifying for a rebate. That's because the average residential house price is higher in those centres - up to $800,341 in Vancouver, $471,269 in Calgary and $434,696 in Toronto. Residents of these cities have almost no chance of qualifying for any GST rebate.

To find out more about the rebate program (or lack thereof), check out Substantial Renovations and the GST/HST New Housing Rebate Guide.

Tuesday, April 20, 2010

How much does it cost to renovate a house in Ottawa?

It's encouraging to see that my December post, How much does it cost to renovate a house in Ottawa anyway? is the second most visited page on this blog (first place goes to 10 examples of Modern architecture in Ottawa).

Recently, I came across another source for estimating renovation costs at The site breaks down the estimated cost of just about everything you might want to do to your home, like roofing, exterior finishes, interior renovations, electrical, HVAC, structural modifications, etc. I am not sure how accurate the prices are, but they seem to be in the ballpark. That said, the site also has a build-a-home calculator that seems to be way out of line with what I have been told so far. The calculator uses a set value of $100/sq ft. to build a new 2-storey house. I haven't heard anyone say it would be less than $200/sq ft.

Other useful items on the site also include a flowchart for general steps to take into account when building a house, although again, the prices they quote seem low. It is also possible to search for contractors on the site, and to post a tender for a job in order to hire a contractor.

Cost estimates creeping up

It's been a while since I posted anything about the renovation, but not a lot has happened since the last post.

One thing we did do is find a builder. We have retained Rex Engel of Engel Construction. He has worked with our architect for about nine years, and the people we talked to who have used him raved about him.

Once we had Rex, we were able to start figuring out accurate cost estimates for the design that Linda Chapman, our architect, had drawn up. Unfortunately, those cost estimates came in well above what we had budgeted. In fact, in order to achieve what we want from the house, the renovation cost is starting to approach the cost of building new. There are also some issues with the house settling after it was originally built. This has led to some foundation problems that would need to be fixed as well as producing a slight slope to the entire house toward the front corner. Last week we brought Rex and Linda back to the house to take a closer look at the foundation and try to estimate the costs of fixing these problems. We also asked Rex to give us an estimate to simply build the place new from scratch. We are still waiting for those estimates to come in. In the meantime, I have spoken again with the bank about financing the building of an entirely new house. We hope to hear back about that this week.

It's been discouraging to see the costs escalate so high. But, we'll forge ahead and see where we come out.