After years of record-shattering house price growth, Ontario is tackling its hot housing market.
The provincial government unveiled its Fair Housing Plan on Thursday, a package it says is intended to bring stability and affordability to renters and home buyers in the Greater Golden Horseshoe.
The headline policies in the plan are a 15% foreign buyer tax and an expansion of rent control throughout the province that will now put a cap on rent increases on buildings built before and after 1991 (previously, buildings built after 1991 were exempt from rent control). Regulations for real estate agents will also see changes intended to eliminate predatory realtor practices such as double-ending and shadow-flipping.
Reports surfaced earlier this week that the government would be introducing broad measures to cool Ontario’s housing market after a meeting between Federal Finance Minister Bill Morneau, Ontario finance minister Charles Sousa and Toronto Mayor John Tory. This followed a record February and March housing season, where prices in many cities in the Greater Golden Horseshoe appreciated by more than 20%.
In addition to rent control, the housing plan will bring down property taxes on purpose-built rental units to fall in line with regular property taxes. The government has committed to incentivizing new rental building construction by selling its surplus lands to developers and investing $125 million over the next five years into a program to boost construction of rental buildings. The province will also work with the City of Toronto to implement a vacant homes tax
The new measures were announced at a press conference attended by Premier Kathleen Wynne, Finance Minister Charles Sousa, and Ontario Minister of Housing, Chris Ballard.
The trio said the new regulations take into account data and commentary from all corners of the housing industry. There had been no shortage of recommendations prior to Thursday’s announcement. Economists had previously said that it will take more than just a foreign buyer tax to fix Ontario’s market. Other housing experts warned against such a tax. Similarly, the decision to expand rent control was also criticized by some experts.
The vacant homes tax and non-resident speculator tax (NRST) echo taxes implemented in Vancouver, where the city charges a 15% tax on non-citizens who buy property that do not work or study in the province, as well as penalizing landlords who keep homes empty.
Wynne announced that similar policies in Ontario are “effective immediately,” eliminating the possibility for investors to close deals before the tax goes into effect. Exemption from the tax will be granted to non-citizens who work in Ontario for one year after the purchase date. Refugees and skilled workers in the immigrant nominee program will also be exempt.
Technically, having a hot housing market has been an economic boon for Ontario . Many cities with price growth, such as Toronto, have strong economies, good employment opportunities, and other factors to attract new residents. But with prices across the province now out of reach for the average person and heavy indication that there might be a housing bubble, it’s about time the government took significant action to tackle the issue.