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? & What will be the impact on the real estate industry, particularly the residential resale market?
The highlights of the Ontario Fair Housing Plan are:
- 15% non-resident speculation tax on the price of homes in the Greater Golden Horseshoe, from Niagara to Peterborough.
- 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. These reviews will have to be developed.
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 government will be long gone when the supply of rental accommodation reaches crisis proportions.
The foreign investor tax may work. 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 (95.1%), and not foreign investor demand (4.9%). 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. At Chestnut Park Real Estate Limited, Brokerage (“Chestnut Park”) we will continue to offer our buyer and seller clients expert and professional services, trust, integrity, knowledge and discretion. We will guide and move our clients through the uncertainties that the Plan will create over the short term. Notwithstanding any possible turmoil in the market our goal must remain that the consumer experience with Chestnut Park and its sales representatives should always be one of excellence.
It is important to recognize that many of these measures have not been enacted into law yet. They are ideas that if passed, will be retroactive to April 20.
The bottom line is supply and demand. Over 100,000 people move to Toronto each year – that’s about 35,000 households. While anecdotally, there seem to be cranes building condominiums everywhere, the fact is only about 18,000 condo units come online each year. That means year after year, there is actually a deficit in supply and demand is consistently growing. Until we find a solution to increasing supply, we don’t expect demand to lessen.
– Chip Barkel, MCNE, SRES, REDM, Toronto Real Estate. Extraordinary Service. Top Results.