What's the point?

Housing:
Under the GST, new housing is subject to tax while used housing is not. Neither is directly subject to PST, although there is currently embedded PST in the cost of new homes equivalent to an estimated 2% tax rate on average since most construction materials are subject to PST. Under the HST there would be no embedded tax in the cost of new homes. However, HST would be applied to new housing, effectively increasing the tax from 2% on average to 7%. That would create a disincentive to purchase a new home or build new housing for the rental market.

B.C. is therefore proposing to provide a partial rebate for new housing equal to 5% of the purchase price up to a maximum rebate of $20,000. Since purchasers currently pay on average the equivalent of a 2% tax through embedded PST, there will not be a tax increase for new housing valued up to $400,000.

This $400,000 threshold reflects the median price of new housing in urban areas in B.C. in 2008, so that on average those purchasing houses at or below the median price would generally be fully protected from a tax increase. Those above the median price would still receive the maximum $20,000 rebate. The rebate would be available whether the new housing is to be owner occupied or rented.