Ontario to tackle soaring housing market with multipronged plan

Theglobeandmail.com
April 21, 2017
By Justin Giovannetti

Kathleen Wynne’s government has put its foot down on Ontario’s overheated housing market, slapping a tax on foreign buyers and introducing rent controls as part of a wide-reaching package of changes that some of the province’s mayors warn could actually reduce available housing.

The plan is ambitious, with 16 measures that pledge to combat speculators, slash red tape, speed construction of new homes, levy taxes on vacant properties, change the way real estate agents operate, end questionable sales practices, catch tax cheats and standardize rental leases.

While the core of Ms. Wynne’s housing plan is a 15-per-cent tax on foreign home buyers that will take effect immediately, some mayors and other critics warn that the new tax might not bring down soaring housing prices, while a cap on rent increases could scare away the investment needed to build thousands of new rental units.

“This is a complex issue,” Ms. Wynne told reporters while standing in a forest of towering new condo buildings in Toronto’s Liberty Village neighbourhood. “There wasn’t one single thing that we could do that would resolve the issues that we’re confronting. That’s why we’re bringing forward this package.”

Toronto Mayor John Tory welcomed some of the Premier’s measures in an interview with The Globe and Mail, saying they send a message to “speculators of all kinds out there.” But he said he was concerned about the sweeping changes to rent control. He said he feared that the government’s proposed incentives for developers, such as breaks on development charges, would not be enough of an incentive to offset the new rent-control rules, which could scupper the recent increase in rental construction.

“I think it would be a real problem for this growing marketplace, this growing city, if we shut off, again, investment in affordable purpose-built rental housing, because we need it so badly,” the mayor said, referring to the 1975 imposition of rent controls that many developers blame for a slowdown in rental construction.

The new plan expands rent control to cover all private rental apartments, instead of just those completed before November, 1991.

Bank of Montreal senior economist Robert Kavcic warned that the rent controls could reduce incentives for builders while also making it attractive for tenants to stay in increasingly underpriced units. “Chronic underbuilding came to a swift end in the late-1990s when rent controls were removed,” he wrote in a note.

Facing a dismal approval rating, Ms. Wynne’s government has promised action for weeks on housing. While she has resisted a foreign-buyers tax in the past, on Thursday she said that the “situation had changed” as prices continued to climb. The Premier and her senior ministers have acknowledged Ontarians’ growing frustration and anger as home prices shot up and families found themselves losing numerous consecutive bidding wars for the few homes they could afford.

“When young people can’t afford their own apartment or can’t imagine ever owning their own home, we know we have a problem,” Ms. Wynne said. “And when the rising cost of housing is making more and more people insecure about their future and about their quality of life in Ontario, we know we have to act.”

After two consecutive years of double-digit gains, Toronto’s average house prices in March of 2017 were up more than 33 per cent from a year earlier.

NDP Leader Andrea Horwath dismissed Ms. Wynne’s housing package as too little, too late. “There is nothing in the Wynne Liberal bullet points that addresses affordable or social housing stock that is desperately needed. And there is nothing in this announcement that helps first-time buyers get into a home of their own,” her office wrote in a statement.

Progressive Conservative Leader Patrick Brown tweeted after the announcement: “Why do Liberal solutions always mean more taxes, more red tape and more debt?” Frank Scarpitti, the mayor of Markham, the fast-growing suburb on Toronto’s northern border, said he welcomed word the province was looking for ways to reduce the delays that can plague new construction. And while he said rebates for development charges for those building rental housing were welcome, it was unclear whether they would be enough to help offset the effect of new rent controls.

He said he had not seen signs that vacant homes were a significant problem in Markham, and that a tax on foreign buyers won’t necessarily cool the region’s red-hot market.

“I am not sure that the non-resident tax is going to cool the market to a point where all of a sudden homes are going to be that much more affordable for young families to buy,” Mr. Scarpitti said. As many as 28,000 new rental units and $2.7-billion in construction could be at risk according to Jim Murphy, the Federation of Rental-Housing Providers of Ontario. His assessment of how builders would react was blunt: “They aren’t going to build.”

Mayor Rob Burton of Oakville, Ont., a suburb west of Toronto where empty million-dollar homes have become a top political issue, praised the Premier for Thursday’s measures, including the pledge to allow certain municipalities to bring taxes on homes left vacant by speculators, similar to one recently imposed in Vancouver.

“The power for municipalities to impose a vacant-home tax is one of the hottest wants in the people that I represent here in Oakville,” Mr. Burton said. “It’s hard not to be happy when somebody gives you what you ask for.”