Fair Housing Plan? Tax Grab Or Effective Plan?

Ontario pricing graph April 2017

Ontario’s housing market has seen very dynamic growth in recent years, with prices in the Greater Toronto Area and the Greater Golden Horseshoe rising significantly. To help curb this issue, the Ontario government has come up with a plan that they think will cool off this market.

House prices have been rising at a high pace in the GTA since the end of the 2008-09 recessions.
After two consecutive years of double-digit gains, average house prices in the Toronto region reached $916,567 in March 2017, up 33.2% from a year earlier.
Aside from the the obvious factors, which are low interest rates and a supply and demand issue, I believe there is another very strong reason for this rapid increase in pricing. Toronto is considered one of world class cities yet our real estate prices have always been lower than the others, such as London, NYC and Paris. As we have become more recognized by the worldwide community, as the world class city we are, the prices have naturally been going up. However, I also believe that domestic investor speculation is also contributing to the rapid price growth.
In an effort to cool down the real estate market in these areas, the Ontario government employed sixteen tactics (aka tax grabs and deceitful tricks) that they call the Ontario fair housing plan, on April 20th.
In my opinion, none of these tactics will crash the Toronto market. It will likely slow things down and hopefully bring us to a more balanced market which will be a big relief for those buying today.

Here are the 16 proposed measures:

1. A 15% non-resident speculation tax to be imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations.Refugees and nominees under the Ontario Immigrant Nominee Program would not be subject to the NRST. Subject to eligibility requirements, a rebate would be available for those who subsequently attain citizenship or permanent resident status as a well as foreign nationals working in Ontario and international students.
This is only in the Golden Horseshoe area and is only a small percentage of the Toronto market. They have taxed the people who don’t get a vote, the same people who aren’t participating in bidding wars, so this makes no sense. The pre-construction condo market is the one sector that will be affected by this tax.
2. Changes to make the rental market more tenant friendly Currently, buildings built after 1991 aren’t subject to a maximum annual rent increase. Rent increases for all buildings will be set by the province and capped at 2.5% This change is effective April 20th but still has to be approved through legislation. They also announced a standardized lease document for all tenants and more rules for landlords.
3. Proposed Tenant protection mandates such as standardized lease agreements and compensation if asked to vacate early.
4. Incentives to encourage more builders to build rental apartment buildings, including a rebate of the development cost charges and requirements to keep municipal tax rates more in line with residential tax rates.
I’m not opposed to this change as we desperately need more rental units in Toronto.  
5. Regulations on assignment sales. Assignment sales are when someone buys a pre-construction property and assigns their agreement of purchase to another buyer before closing the transaction with the builder.
It is unclear how they will address this issue, but I suspect there will be more of an effort to police those doing this and ensuring that they are paying taxes on the gain.
6. Reporting enforcement requirements allowing the government to track citizenship, residency and to report the reason for purchasing property (whether it is for investment or to live in).
In my opinion, this is a good thing and long overdue. Foreign investment has been under reported for far too long. I, for one would like to see the real honest numbers on this.
7. A program to leverage the value of assets across the province to develop a mix of market-price housing and Potential sites under consideration for a pilot project include the West Don Lands, 27 Grosvenor/26 Grenville Streets in Toronto, and other sites in the province. This builds on an agreement reached previously with the City of Toronto to ensure a minimum of 20% of residential units within the West Don Lands are available for affordable rental, with an additional 5% of units for affordable ownership.
That would be amazing but will it actually happen. I have my serious doubts.
8. Allowing Toronto to impose a tax on vacant homes and land.
9. Legislation that would allow Toronto and possibly other municipalities to introduce a tax in an effort to encourage property owners to sell unoccupied units or rent them out.
I see this as a tax grab, plain and simple.
10. A proposed new provincial team in order to identify barriers to specific housing development projects and work with developers and municipalities to find solutions.
11. A review to ensure that consumers are fairly represented in real estate transactions.
I’m unsure as to how this has anything to do with cooling down the real estate market, but it is definitely needed. There are unscrupulous agents who shouldn’t have their license because they conduct their business in an unethical manner. They must be forced to follow the rules so that all is transparent to the consumer at all times when faced with a multiple offer situation where the listing agent has his/her own offer competing with theirs.
12. Measures employed to better understand speculation and flipping
13. Imposing a Quarterly review of the state of the housing market
14. Better CRA reporting to collect appropriate taxes on property sales
 15. Set timelines to be established in consultation with the sector and the Technical Standards & Safety Authority
 16. Provisions to ‘consider the appropriate unit sizes’ in high-density buildings. This would require municipalities to consider the appropriate to accommodate a diverse range of household sizes and incomes, among other things.
In my opinion, these proposed changes the Ontario government want to implement, are a ploy so that they can be seen as “making an effort” to help the current market conditions. In reality, their “efforts” are a desperate attempt to gain popularity and will have a minimal impact on slowing the market.

 

 

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