Ontario Introduces Measures to Cool Hot Housing Market
The Government of Ontario is trying to cool the jets on a hot housing market. As reported by the Ontario government, the average house price in Toronto reached $916,567 in March 2017, which is up 33.2 per cent from last year. To put the entire situation in perspective, RBC Economics said housing affordability for the fourth quarter of 2016 in the Toronto area was at the second-worst level on record since the mid-1980s.
Meanwhile, the average rental costs per square foot for new leases in the Greater Toronto Area condo market rose 11 per cent in the last quarter of 2016, being the fastest rise since at least 2011. While potential homeowners are already concerned with finding affordable mortgage rates, the government hopes to make it easier for people to find affordable homes, too.
"People work hard to provide for their families," said Premier Kathleen Wynn of Ontario when introducing the Fair Housing Plan.
"They should be able to rent or enter the real estate market without making great sacrifices or taking on a huge amount of risk."
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15 per cent tax on foreign home buyers
The biggest change is the 15 per cent Non-Resident Speculation Tax (NRST) for homes in the Greater Golden Horseshoe. This will apply to non-citizens or non-permanent residents of Canada and foreign corporations, but will not affect refugees or people brought in through the Ontario Immigrant Nominee Program. If someone chooses to become a permanent resident or citizen after paying the NRST, they can apply for a rebate on this tax.
The government is also making changes that will affect renters. There will be rent control on all private rental units, including those built after 1991 (which was not the case before). The Residential Tenancies Act will also be changed to better protect the renter. This will mean a standard lease that will be available in a number of languages and there will be tighter provisions for landlord's own use evictions.
"We know strengthening Ontario’s rental market is an important way our Fair Housing Plan will help make everyday life more predictable, affordable and fair for Ontarians so they can continue to put down roots in the communities they love,” said Chris Ballard, the Minister of Housing and who is responsible for the Poverty Reduction Strategy.
Review of real estate agent rules
On the side of the real estate agents, the government wants to review the rules to ensure the consumer is being fairly represented in all real estate dealings. This includes double-ending, where the real estate agent represents both the bidder and seller. This practice is thought to increase housing costs and is banned in many other provinces. The Ontario government said it's going to modernize its rules to improve the home-buying experience.
The government also wants to actively increase the number of residential properties that are on the market. It will be pushing for surplus provincial land to be developed, such as the West Don Lands. The City of Toronto also wants to introduce a vacant homes property tax and municipalities will be given the flexibility to introduce higher taxes for vacant lands. This measure is expected to encourage property owners to sell, or rent out, unoccupied residential properties to help alleviate some of the pressures on the housing supply. Additionally, there will be $125-million dedicated towards a five-year program that will rebate developers who build rental apartment buildings.
The government believes there is enough land currently available to meet the needs of people in this region. It wants to work with municipalities to update the Growth Plan within the Golden Horseshoe to make sure the towns/cities are approving developments to reflect a wide range of choices for people.
Charles Sousa is the Minister of Finance and said, while a strong housing market reflects Ontario's strong economy, everyone should be able to find an affordable home.
"Ontario's Fair Housing Plan is a thoughtful way to address the recent price increases in our housing and rental market.”
Will this solve the problem or make it worse?
In the end, the Ontario government hopes this will mean people in the province will have an easier time buying homes and finding affordable rental properties. There is a concern that these new measures will result in a backlash from developers, who will choose to halt their projects. Should this happen, this could mean an even greater demand on rental properties and real estate in the region, potentially meaning even higher costs.
It's uncertain whether these new measures will have any effect on the housing market. For example, Vancouver introduced a similar non-resident speculationtax to cool its own housing market not that long ago. Since then, it's only seen a slight decrease in housing prices and they're already starting to rise, again.