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.

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.

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 Ontariocontractors.com. 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.

Is your neighbourhood affecting your health?

Recently, a team led by researchers from the University of Ottawa published a study claiming that the neighbourhood you live in can seriously affect your health in ways you may never have thought of. Using data from the 2006 census and other civic sources, the Ottawa Neighbourhood Study breaks Ottawa down into 96 neighbourhoods and highlights connections between the health of citizens and factors such as the number of fast-food outlets or the number of grocery stores.

For example, 56% of adults in Central Orleans report being overweight or obese while 39% of Westboro residents report being overweight or obese. Could this have anything to do with the fact that Central Orleans has 31 fast-food outlets, or about 9 per 1000 people, while Westboro has 5 fast-food outlets, or about .53 per 1000 people. Well, the answers are probably not that clear cut. But this study, the most detailed look ever at the health of Ottawans and the neighbourhoods they live in, provides a lot of interesting facts and is a good jumping-off point for more on-the-ground studies.

One interesting point for me was seeing just how varied neighbourhoods can be, even when are located side-by-side. Take the two juxtaposed neighbourhoods of Hintonburg and Island Park, for example. In Hintonburg, 19% of the residents represent a visible minority, 33% are immigrants, the average household income is $52,825 - well below the Ottawa average $86,848, and the neighbourhood scores in the lowest quintile of the study's socioeconomic index. Next door, in the neighbourhood of Island Park on the other hand, only 6.5% of the residents represent a visible minority, 19% are immigrants, the average household income is $117,873 and the neighbourhood scores in the highest quintile of the study's socio-economic index.

For each neighbourhood, the researchers also provide a short summary of the neighbourhood's strengths and challenges. There is also a lot of historical information about each neighbourhood - did you know that Hintonburg was a town in the early 1900's before it was annexed by Ottawa?

Another feature I like is that the researchers acknowledge that they have probably gotten some things wrong, and they encourage readers to submit comments. There is also a wiki-based map that should allow anyone to add features, but it does not appear to be working properly at the time of writing.

If your interested in this study and what it says about your neighbourhood, visit the website at neighbourhoodstucy.ca or read about it in the March 10 article in the Ottawa Citizen.

Example of Prairie Style house

All this recent talk about the prairie style made me wonder if I could find any examples of it in Ottawa. After a quick drive around, I found what I think is an example of this style on Island Park Drive.

Below is another example, but not from Ottawa. I think this one is from Calgary or Cochrane, Alberta, but I can't quite remember.

Traditional style wins out

After much back-and-forth, we decided to go with the more traditional looking house. The contemporary design was nice, and we loved the porch that Linda designed, but in the end I think I'm a sucker for the strong horizontal lines produced by the prairie style. I also didn't care too much for the windows in the contemporary design. I felt they were too plain, even though they were very characteristic of the Modern style. In addition, the hipped roof of our house does not really lend itself to the modern look.

In terms of deciding factors, cost was not one of them, as both styles cost about the same. Similarly, fitting in with the neighbourhood was not really an issue, because all around we can find examples of Arts and Crafts, Modern, Mid-century Modern and Victory houses.

Another consideration that was raised, which we had not thought about, was that our house might end up looking too squat in the modern style. If you look at all the examples of modern houses in my previous post, they are all tall; they have a lot of presence on the street. Our house would lack that height (at least in the front) making it potentially look squat from the street.

So, with that sorted out, its onto the next step, designing the kitchen and starting to find a builder.


Examples of Craftsman and Modern style homes in the neighbourhood