As with many incentives offered by the federal and provincial governments, when you take a closer look, things are not always quite what they seem. They do, however, make great headlines.

The latest example is the government rebates being offered to homeowners installing electric heat pumps. On the surface, the incentives sound impressive. But before you rush out to replace your furnace, it’s worth examining the numbers.

The federal government recently announced rebates of up to $10,000 for homeowners installing an eligible electric heat pump. Ontario already offers rebates of up to $7,500 for air-source heat pumps. The province also offers up to $12,000 for ground-source heat pumps.

Sounds pretty attractive, doesn’t it?

Now come the conditions.

To qualify for the maximum federal rebate of $10,000, a homeowner must belong to a below-median-income household. Otherwise, the federal rebate is $2,000. Interestingly, the government has not yet released the specific income thresholds that will determine who qualifies.

According to the most recent Census, the median household income in Durham Region was approximately $107,000 before taxes. That figure is based on 2020 income, so it shouldn’t be confused with today’s household earnings or the federal government’s eventual eligibility threshold.

There is another interesting catch.

While Ontario advertises rebates of up to $7,500 for air-source heat pumps, that maximum generally applies to homeowners currently heating with electricity, oil, propane or wood. For homeowners heating with natural gas, the provincial rebate is limited to $2,000.

That’s a pretty significant distinction in a community where many homes are heated with natural gas.

Let’s assume a homeowner qualifies for $2,000 federally and another $2,000 provincially. That gives us a potential combined rebate of $4,000, provided the installation satisfies both programs’ requirements.

Now let’s look at the cost.

A cold-climate electric air-source heat pump for a typical detached home in Durham Region can cost between $12,000 and $18,000 installed. Using $15,000 as a reasonable example, the homeowner would be spending approximately $11,000 after rebates, before taxes.

For comparison, a new high-efficiency natural gas furnace might cost approximately $6,000 installed.

That’s a $5,000 difference.

But there’s another consideration. Unlike a gas furnace, a heat pump also provides air conditioning. If the homeowner needs to replace both an aging furnace and air conditioner, the financial comparison becomes considerably more favourable for the heat pump.

What about ongoing operating expenses?

This is where things become interesting.

Natural gas remains a competitive heating fuel in Ontario. Although modern heat pumps use considerably less energy to produce heat, electricity costs and efficiency during very cold weather can affect the savings.

Natural Resources Canada has found that Ontario homeowners retaining both gas and electricity service could experience higher annual utility bills after installing a heat pump. On the other hand, homeowners who eliminate their natural gas connection entirely could achieve a different result.

In other words, installing a heat pump doesn’t automatically mean lower heating bills.

And there are other considerations. How long will the equipment last? What will maintenance cost? Will electrical upgrades be required? And how much usable life remains in the existing furnace?

What About the Resale Value of Your Home?

Over the past 40 years, I’ve watched attitudes toward home heating come full circle. In the 1980s, I remember seeing certificates proudly announcing that a home was heated by electricity. At the time, many homeowners were concerned about the safety of natural gas, and I recall homes with gas heating selling at a discount.

Over the years, that thinking changed. Natural gas became the preferred heating source for many buyers, while homes with electric baseboard or forced-air electric heating became less desirable, largely because of concerns about operating costs.

Now, governments are offering substantial financial incentives to encourage homeowners to move back toward electric heating.

But here’s something the government rebates don’t address: how will that decision affect the future saleability and value of your home?

Although modern electric heat pumps are considerably more efficient than traditional electric heating systems, buyers don’t always understand the difference. In my experience, the words “electric heat” can still raise concerns about operating costs, particularly among buyers accustomed to natural gas.

A homeowner might spend thousands of dollars converting to a heat pump, believing they’re making a financially sound improvement, only to discover when selling that prospective buyers don’t necessarily place the same value on that investment.

That doesn’t mean a heat pump will automatically reduce a property’s value. It does mean that buyer perception, along with operating costs, installation costs and the age of the equipment, deserves consideration before making the switch.

After four decades in real estate, I’ve learned that what governments encourage homeowners to install and what future buyers are willing to pay for are not always the same thing.

There’s no question that heat pumps offer environmental advantages. They can substantially reduce greenhouse gas emissions, particularly when replacing oil, propane or traditional electric heating. They also offer the convenience of heating and cooling in one system.

For some homeowners, especially those replacing both their furnace and air conditioner, the rebates could make a heat pump an attractive investment.

For others, particularly those with a relatively new natural gas furnace and functioning air conditioner, replacing perfectly good equipment simply to collect a government rebate deserves considerably more thought.

And if you’re planning to sell your home within the next few years, there’s another calculation to make. Will the investment improve your home’s marketability, or are you spending money on something a future buyer may not be willing to pay extra for?

The real question isn’t how much money the government is offering. It’s how much the homeowner will spend, or save, over the next ten or fifteen years, and whether that investment will be reflected in the value of their home.

Before spending $15,000 to save money on heating, make sure you’ve established that you’re actually going to save money.