On April 20th, the provincial government introduced the Ontario Fair Housing Plan. It is an omnibus package of measures with the stated intent to “help more people find affordable homes, protect buyers and renters and bring stability to the real estate market.” Two questions emerge: will it work, and what will be the impact on the real estate industry, particularly the residential resale market?
The highlights of the Ontario Fair Housing Plan are:
- A 15 percent non-resident speculation tax on the price of homes in the Greater Golden Horseshoe.
- The expansion of rent control, to include those buildings built after 1991.
- Developing a standard residential lease.
- A program to leverage the value of surplus provincial land to develop new market and affordable housing.
- Empower the City of Toronto and other municipalities to introduce a vacant homes property tax.
- Ensuring property tax on multi-residential buildings is fair.
- Development charge rebates to encourage the construction of rental accommodation.
In addition to the above-measures, the Plan announced that it would review assignments (or “paper flipping”), double ending (or the practice of a single broker/salesperson representing both the buyer and seller in the same transaction), and partnering with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes are paid.
There is no doubt that the expansion of rent control will immediately have the effect of limiting the rent increases that landlords can implement. Unfortunately, this measure may be responsible for creating a greater rental housing problem in the future. Developers will likely stop building purpose built rental projects, and the measure may even cause developers to reconsider condominium projects that were also designed to appeal to landlord-investors. The current Liberal government will be long gone when the supply of rental accommodation reaches crisis proportions.
The foreign investor tax may work. However, investors can be very savvy business people and will inevitably find ways around the governing criteria and imposition of the new tax. The new legislation will have some impact, but that impact should be minimal. There is ample evidence that the residential resale market in the greater Toronto area is being driven by domestic, and not foreign investor demand. That being the case, aside from a possible momentary “let’s wait and see” lull, the residential and recreational markets in Toronto and Ontario should continue much as they were before the announcement of the Ontario Fair Housing Plan.
The market is being driven by historically low mortgage interest rates, 100,000 net migration annually to the greater Toronto area, and a lack of housing supply, both rental and home ownership. None of these matters were addressed by the Plan, precisely because it is beyond the power of the provincial government to do so. So, if the ultimate goal is to make housing in Ontario affordable, the Plan will fail, because even the extension of rent controls will in the longer-term result in a rental housing problem.
People will continue to require housing in the greater Toronto area. Prices will not come down until there is more supply.
President and CEO
Chestnut Park Real Estate Limited