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Published on Thursday, April 20, 2017

A bit of help for homebuyers, a bit more for tenants — and a bit for Liberals at the polls (they hope)

ANALYSIS: There is much good in the Liberal plan to cool the GTA housing market, and much politics at work, too

A bit of help for homebuyers, a bit more for tenants — and a bit for Liberals at the polls (they hope)
The Liberal government today announced measures to stabilize the GTA's real estate market.
(Lars Hagberg/CP)
By John Michael McGrath, TVO

Tenants may see some relief — which is no small matter — but if you can't afford a house in the GTA today, you still won't be able to afford one next year. Don't take my word for it — Finance Minister Charles Sousa admitted as much on Thursday, as the government unveiled its long-awaited plan to cool the Greater Toronto Area's real estate frenzy: “We’re trying to stabilize the market, we recognize these homes are one of the biggest assets for many families’ retirement as well,” Sousa said, “So we’re not trying to change the market pricing necessarily, we’re just trying to ensure stability.”

It’s the fundamental contradiction in housing policy: one buyer’s exorbitant home price is another seller’s retirement plan. Both in Ontario and in B.C. before it, governments are leery of trying to force outright price cuts on homes for fear of impoverishing the large bloc of voters who have the majority of their wealth tied up in housing. Aside from the obvious economic consequences, suddenly losing home equity tends to make voters cranky, and the Liberals have enough of those in Ontario lately.

Which isn't to say there are no good ideas in today’s housing plan, only that the government (and probably a government of any political stripe) was always going to be cautious.

The policies basically fall into into two groups: ones aimed at cooling the demand for (and in turn prices of) home purchases, and ones hoping to stabilize the precarious conditions Ontario's renters face.

On the home-buying front, the headline measures announced today include a foreign buyer’s tax of the kind that has already mostly failed in Vancouver, as well as giving Toronto (“and, potentially other municipalities,” according to the plan) the right to charge a vacant units tax, thereby providing owners with incentives to either put those units up for sale or rent. (This will be fiendish to enforce, but Toronto will at least get the capacity to spend the requisite time and money if it chooses.)

The government did its best to appear “open for business” to the world at the same time it was (contrary to its own statements less than a year ago) introducing the foreign buyer’s tax — which they’d prefer we all call a Non-Resident Speculation Tax. The NRST will have plenty of exemptions for actual humans actually living in actual Ontario, but is designed, as much as the province can, to catch international money flows. A surtax of 15 per cent will apply to any transfer of land with one to six units of housing on it. Apartments of seven units or more, as well as all agricultural, industrial, and commercial property, are still fair game for foreign buyers.

(Premier Wynne told reporters she changed her mind on the foreign buyer's tax because market realities had changed — and in fairness the government can’t be faulted for a turnaround in the face of 20 and 30 per cent increases in GTA home prices.)

One big exemption in the NRST: it will offer rebates to foreign students who have been in-province attending colleges or universities for at least two years. Those who believe foreign speculators have been driving up the market have put a lot of weight on the supposed role of international students attending universities in Vancouver and Toronto. This exemption would seem to leave that door still mostly-open.

Non-rental homebuilders were left mostly untouched by the government’s proposed changes. Municipalities will get a “use it or lose it” taxing power intended to prod developers into building on land that’s already been zoned and serviced. It’s a nod to mayors like Rob Burton of Oakville, who accused developers of hoarding land they’d already received permission to build on. (In Oakville's case, Burton claimed there were as many as 6,000 units that had approved but weren't being built.) This will be a key issue to watch, both in terms of how much leeway municipalities actually get from the province and what results, if any, such a tax actually produces.

For current tenants, the news is good: The government is ending the 1991 exemption on rent control — the one that has exempted new construction from the rules capping annual rent increases — that has seen tenants in new condominium units endure double-digit increases in Toronto’s hot market. The Liberals are also proposing to tighten the rules for when a landlord can make a “own use” eviction, where a tenant is suddenly told the owner’s family needs the space. This should mean that tenants both have more stability in how much they pay, and more security in their tenure.

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Author: Mayor Rob Burton

Categories: News

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