Ontario's Fair Housing Plan

The Ontario Liberal Government Released a 16 Point Plan Aimed at Cooling Ontario's Rental and Sale Housing Market. But Did It Miss The Mark? 

Yesterday the Ontario Liberal Government announced its Fair Housing Plan which contains 16 rent and housing reforms. While policies that create a level playing field and keep housing affordable are of critical importance. Some of these measures may have missed the mark or simply not gone far enough to elicit real and meaningful change. The centrepiece of Ontario’s new housing strategy is a 15-per-cent tax on home purchases by foreign buyers in the Greater Golden Horseshoe, from the Niagara region to Peterborough. I have an issue with this policy on several fronts. The most significant being that we lack the comprehensive data on the national origin of buyers in Canada to justify this tax. According to the limited data that we do have, foreign buyers make up a relatively small percentage of the overall real estate market in Ontario (different estimates place the number between 4.9% and 15%). Furthermore, a foreign buyer as defined by this plan refers to anyone who is not a Canadian citizen or permanent resident. Therefore, new immigrants who plan to work and live within the GTA will now be subject to this additional tax. Also, given that this is not a Federal Tax, the foreign speculators that it is aimed at targeting can seemingly move their money to other markets in Canada and avoid this cost. And finally, given Toronto's affordability compared to other global cities and favourable currency exchange, this tax could simply be seen as the cost of doing business in Toronto. Speculators both foreign and national can result in a frenzied market. Simply slapping a tax on foreign buyers and overlooking domestic speculators will miss a large segment of the market that is having an effect on the rapidly increasing prices.

Rent control is another critical issue. The ability of a Landlord to double or triple the rent of unit simply because it was built after 1991 is an absurd notion. However, establishing a hard cap on rental properties so cut and dry is a dangerous proposition. Think of rent-controlled apartments in New York City. These types of rules can essentially create a two-tier system of tenants. Those who have rented a property at a favourable price and are protected, and those who are not. Furthermore, it is important to note that even though the rate of increase can be capped, a landlord is able to decide what rent they wish to charge for a vacant unit and do not have to rent it for a single dollar less than what they deem in their sole opinion to be fair. My greatest worry is that more landlords will place a much higher initial rental rate on their unit and may let it sit vacant until they find someone who is willing to pay their asking price. With vacancy rates around 1% in the city of Toronto, Landlords can be very selective with their Tenants and demand a premium for their units. Therefore, few vacancies and a capped increase could lead to even higher rents throughout the GTA. The best way to combat these issues is to build more purpose built rentals and increase the rental stock so that tenants have choices. Competition and greater supply is the best solution for reducing rental rates.

Perhaps the most frustrating aspect of this plan is that it does not appear to address the simple issues of supply and demand in both the sale and rental side of the housing market. Creating incentives for the construction of purpose-built rental properties is essential to improving rental rates. And while this plan offers some minor incentives, I think the government did not go far enough to really spur more rental developments. Likewise, the city and province need to create incentives for mixed housing developments. We need more townhomes and mid-rise condominium units that can blend within existing residential neighbourhoods that consist primarily of semi-detached and detached homes. We seem to be a city stuck in a mindset of either highrise condominiums or single family dwellings with few options in between. Until we find a way to add more housing stock throughout the GTA that can accommodate families (and more 500 square foot, 1 bedroom high rise condos won't do that!) we will continually be looking at a supply shortage. Likewise, this plan has largely ignored other aspects that keep people within Toronto from selling such as the Municipal Land Transfer Tax (MLTT). According to a recent Toronto Star article, 59% of Torontonians oppose the MLTT yet the city actually increased the tax rates this year! If you are looking to move from an average semi-detached home in the city valued at approximately $900,000 to an average detached home valued at $1,600,000 you would pay $56,950 in Land Transfer Tax! Once you add in other expenses such as Realtor fees, legal fees, moving fees, and other costs, many homeowners simply decide to stay put and renovate their home. As a result, the traditional 2 or 3 bedroom, 1 bathroom, semi-detached 'starter homes' are being expanded with new additions and being made into forever homes. Further eliminating the limited housing stock in this section of the market.

Overall, Ontario's Fair Housing Plan a small step in the right direction, but one that I believe is focused on the wrong issues. Until we find a way to build more housing for the 40,000+ people each year that move into the GTA to live and work, these issues remain prevalent as we continue to grow as a city and a region.

Ken Mazurek