Okay… so Ontario’s Fair Housing Plan isn’t really a surprise.
It’s the kind of gift you’ve long anticipated. You open the box. And awe turns to blah. Just like when it was your birthday and you didn’t get the birthday present you really wanted.
Do we really need to go over all 16 points of Ontario’s Fair Housing Plan?
I won’t bore you. So read it yourself here.
I will go over some of the key points… and summarize the rest. That way, we can move on to doing more interesting things with our day.
Don’t get me wrong. I’m not brushing this off like it’s nothing. Sure, it’s a gift. But will aspiring home buyers really benefit from all this? Will it really cause the Toronto real estate bubble to burst?
I don’t think so. And here’s why.
Introducing the NRST
Otherwise known as the “15-per-cent Non-Resident Speculation Tax” for those of you who don’t like fancy acronyms to make trivial things seem important.
Note the wording on Ontario’s official news release says “legislation… if passed.” I mean… sure, go over all the formalities. But this is a tax that won’t really hinder the rising prices. Maybe it’ll stop it a bit… or just let it cool off… but to bring things back to a level of ‘affordability’ — not so much.
Vancouver’s foreign buyer tax had zero exemptions.
Ontario’s? Well, there’s a few exemptions. And that’s why it won’t crash the market.
First of all, there is limited data on how much foreign buying and speculating is going on. In fact, I have a ‘feeling’ there’s more local speculation happening than foreign speculating.
Want to know how you can be exempted from this tax?
…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. See technical bulletin for further information.
And there’s a lot of workarounds in the works on how some foreign buyers (and sellers… and whoever they’re working with) will skirt this foreign tax. Enough to make it not that big of a deal. And certainly not a surprise.
Renters! You’re going to get a lot more protection!
Yup, don’t stay up all night worrying about that bully landlord who’s going to beat you up tomorrow by doubling your rent and kicking you out in the middle of winter.
They can no longer increase your rent more than the prescribed rate even if you live in a post-1991 residential structure. That means every dwelling now occupied by a renter will have rent controls.
The maximum your rent will go up is capped at 2.5% annually.
And here’s another thing… if a landlord needs you to vacate your rental unit, you will be ‘adequately compensated’!
Increasing housing supply… here’s a no brainer
To cool a market… to make housing more affordable… to give Canadians a chance to buy real estate in their own cities… it would make sense to increase housing supply, right?
So here’s what Ontario will do.
They’ll establish “a program to leverage the value of surplus provincial land assets across the province to develop a mix of market housing and new, permanent, sustainable and affordable housing supply.”
Whew… what does that even mean? And will this program actually end up doing… anything…?
How about allowing City of Toronto legislation that… “if passed”… will allow Toronto to charge a vacant home tax? How exactly does that increase housing supply?
And there’s a whole lot of other goodies (again… read it if you want) all gift-wrapped in political jargon and filled with contingencies and provincial spending. After all, it’s your tax money that’s going to fund this gift to you.
A political move
The timing is perfect. Give back to the people in time for re-election next year. But how will this affect the real estate market?
If you’re a foreign buyer, whether or not you’re speculating in Toronto real estate, a 15% tax with a bonus slew of exemptions won’t change your mind if you want to park your money in a safe haven.
If you’re genuinely moving into Ontario’s cities for your kids’ education and your own work and lifestyle choices, this tax won’t even affect you in the long run.
A whole bunch of stuff has been packaged in this housing plan.
Maybe it’ll cool the market. A bit.
But Ontario’s Fair Housing Plan is not enough to make detached homes ultra-affordable, or change the fact that most first time buyers are going to end up in condos or townhouses (and there’s nothing wrong with that).
It’s going to drive up prices outside Toronto, as homeowners continue to cash out and acquire properties at a fraction of the price of living in the city.
What will affect the real estate market?
Aside from the fallout this might cause because of the media’s spin on how this tax would affect the market?
Or the rumours going around that this might cause the market to crash?
It all goes back to the basics of supply and demand.
You’ll see lots more listings not because of Ontario’s Fair Housing Plan, but because of seasonality.
Prices may cool a bit because of the fear and uncertainty this might cause.
Homeowners may sell to ‘cash out’ after experiencing double digit price gains year-to-year.
But a 33% increase in home prices isn’t sustainable forever. And as supply starts to increase (whether caused by Wynne or just the market itself), prices will stabilize… at least… and maybe even cool.
Anticipate a market transition soon.