Last week, the provincial government released its plan to cool the runaway Ontario real estate market, increase supply and help create more and fairer rental accommodations for residents. You can read the whole 16-point plan here.
There are some promising measures, as well as a couple that tread a little too hard on capitalism for my taste. But, while I still have reservations about the intrusion of government legislation into a free market economy, I acknowledge that housing is more than just a commodity. It’s an inalienable right in any first-world country, and one of the government’s legitimate roles is certainly to protect its citizens’ human rights.
That said, it’s an ambitious plan that will mean we’ve got a long time to wait before we see legislation introduced for some of these points, let alone passed, and as usual, the issue of goals and measurable results is absent. As I said last week, it’s impossible to know whether they’re successful until we know how they define success.
Sure to be one of the argued-about points is the first: the introduction of an NRST (Non-Resident Speculation Tax) of 15% on Golden Horseshoe buyers who are not citizens or permanent residents of Canada and foreign corporations. The tax isn’t about foreign ownership per se, but rather is aimed at those who would profit from our prices, and then take their money home to spend.
The government has made provisions to a) placate the real estate industry and b) try to minimize any unwelcome effects on immigration; the tax would be eligible for rebate if a buyer becomes a permanent resident within four years of sale and the property is used as their primary residence, as well as foreign nationals working (and spending) in Ontario and international students.
Critics claim such a tax has impacted prices in Vancouver by as much as 40%, as well as spurring a dip in transfer tax revenue. Prominent economists, such as Robert Kavcic of BMO, have been advocating for such a move for a while now.
Another key point aimed at speculators is the additional scrutiny of paper flippers, those who purchase a home in pre-construction and then assign it to another buyer prior to closing. It’s a little early to comment on this one, as the plan at this point is simply to “work to understand and tackle practices that may be contributing to tax avoidance and excessive speculation,” which doesn’t mean much. Tax avoidance isn’t a problem particular to the real estate market or to speculators, and by all means, address it. I’ll be interested to know what those practices are.
As with most of the plan’s points, there are additional administrative costs that will be incurred, and in the interest of full transparency, I’d like to know what they are, and whether they outweigh any anticipated revenue recovery. Several points involve new-program implementation, and every time a phrase like “ensure” or “work with” is used, you know that means additional staff to do so. One part of the plan is to create a new Housing Supply Team with dedicated provincial employees — how many and how much?
Much of the plan is less about revenue than about curbing prices, but if they’re going to spend my tax money, I’d like the chance to decide whether I approve of their choices.
The plan would hand additional power over to the municipalities, which in general I favour. It’s hard to know what the climate really is in Toronto when you spend all your time in Ottawa. It also gives residents an easier path to feedback and participation in the process.
In the interest of increasing supply, measures include empowering Toronto to leverage a vacant homes tax, as well as the province leveraging the value of surplus land to development, with a West Don Lands site earmarked for the pilot project. Building on an existing agreement with the city, the housing mix would have to include a minimum of 20% affordable rental units and 5% affordable ownership units among the available residential units.
The rental market is a complex issue of its own, and while rent control seem like a no-brainer to residents, they can be a detriment to development — condo units, for example, are harder to sell to potential landlords if they can’t be rented for market value, whatever that means at the time. To help offset any such effects, there are additional measures included in the plan to encourage purpose-built rental development, including a development charge rebate.
The plan is comprehensive and if entirely implemented will mean we may be looking at a considerably different real estate environment in a few years, but right now it’s just a lot of intention with the potential for action. If any of it is important to you, write to your MP and tell them which side you’re on.