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With public concern and political pressure over the ongoing housing and affordability crisis now boiling over, a much-anticipated response from Ontario's Liberal government was announced this morning. Ontario's Fair Housing Plan consists of sixteen measures that the provincial government hopes will increase affordability while cooling—or alternatively stabilizing—runaway housing markets, including the implementation of new rent control measures and a foreign buyer tax.
Leading up to the announcement, back-to-back years of double-digit gains in Toronto's average home prices, non-resident buyer speculation, lack of affordable housing, ballooning rental rates, and low housing supply, have all been cited as factors in what is being diagnosed as an increasingly unsustainable housing market.
"People work hard to provide for their families," said Premier Kathleen Wynne at this morning's announcement. "They should be able to rent or enter the real estate market without making great sacrifices or taking on a huge amount of risk. At the same time, we recognize the need to protect the significant investment homeowners have made. This plan balances those needs to stabilize the market and prevent a sharp correction that would be harmful to everyone.”
Possibly the most far-reaching of these measures is a 15% Non-Resident Speculation Tax (NRST). Better known as a foreign buyer tax, this fee will be implemented on any non-Canadian citizens, non-permanent residents and non-Canadian corporations buying residential properties containing between one and six units in the Greater Golden Horseshoe region (GGH). A similar measure introduced in Vancouver last year had an almost immediate impact on that city's red-hot housing market, significantly cooling demand by speculative buyers from abroad. According to an early 2017 report from real estate giant Royal LePage, Vancouver's housing market had begun to cool, with prices expected to fall by 8.5% this year.
Another major element in the province's plan is the expansion of rent to control to cover all private rental units, closing an existing loophole that limits rent control to buildings constructed before 1991. The decline of purpose-built rental housing—which has recently witnessed a resurgence due to increased demand—has been attributed by some to previous rent control measures, though the extent to which rent controls have impacted new construction starts is disputed.
To mitigate the potential negative impacts that closing the so-called 1991 loophole could have on new rental construction, Ontario's Fair Housing Plan will also introduce a targeted $125-million, five-year program, offering a rebate on a portion of development charges for rental apartment buildings.
Real estate speculation and tax avoidance remain primary concerns in the region, and the new plan would address the issue, first by exploring paper flipping practices that could be contributing to these problems. Known as 'assignment' in the real estate industry, many purchasers currently enter into contractual agreements to buy property, then offload their interest in property/units to another buyer before the start of the occupancy period or the official closing/registration of the building. While the Fair Housing Plan's creation of a new Housing Supply Team aims to identify and overcome obstacles pertaining to specific projects, specifics of how this would apply to the development industry remain unclear in the Province's newly-released documents.
The new legislation would also allow Toronto—and possibly other municipalities—to table a tax on vacant homes. This measure would provide some incentive to owners of vacant properties to either sell or rent out their space. Another measure will see the province working with local municipalities to earmark surplus Provincially-owned lands for new affordable and rental housing projects. A few such sites are currently being considered for a pilot project, including the West Don Lands, 27 Grosvenor (parking garage for the former Coroner's building) and 26 Grenville (podium of the former Coroner's building) in Toronto.
New measures are also being introduced by the Canada Mortgage and Housing Corporation (CMHC), set to be implemented on May 15th. CMHC will be expanding its affordable housing flexibilities to existing rental properties such as social housing projects with up to 5 years remaining in the Operating Agreement, which previously only applied to new rental properties. The corporation is revising its technical definition of "affordability" to recognize housing objectives from all levels of government, which will open the door for further incentive to construct affordable housing. Other measures to be implemented by the CMHC next month include the introduction of improved underwriting flexibilities and a revised premium schedule supporting increased affordable housing.
How do you think these new measures will affect Toronto's ongoing housing crisis and real estate industry? Let us know by sharing your comments in the field provided at the bottom of this page.
