This study involved the development of a new heat pump water heater (HPWH) model in the TRNSYS simulation software to investigate the effect of a HPWH unit on the space heating and cooling requirements of a house. The result of the study showed that humidity has a negative effect on the performance of the unit at low temperatures. The unit had a maximum coefficient of performance (COP) of 3.07 and minimum of 2.46 for a basement temperature held at 18oC. It was found the HPWH unit is not cost effective in comparison to a natural gas water heater. However, the HPWH significantly reduces house emissions. Furthermore, the HPWH was shown to have a payback period of 4 years in Ontario in comparison to a 12 and 9 year payback period in Quebec and British Columbia, respectively.