April 27, 2017

New Tenant Compensation Rules Announced in Fair Housing Plan Update

The overheating of Toronto’s housing market has become more than just a GTA problem, spreading all the way across the Golden Horseshoe. Smaller cities and towns in the surrounding area have become the only option for new buyers looking to enter the market while staying near Toronto, which has meant an increase in demand–and therefore an increase in market value – for homes as far south as Niagara and all the way north up to Peterborough.

There are a few issues at work here that the Liberal government is trying to address with the Fair Housing and Fair Renting Plans, a package of 16 specific new measures revealed last week. However, trying to pinpoint the cause behind Ontario’s housing market woes is nuanced – there have been a few key factors experts have repeatedly pointed to as potential causes.

Here’s a roundup of main issues the Ontario government is trying to address.

The Need for Rental Protections

A scant supply of affordable units in Toronto, coupled with a two-tiered system that applied rent controls to properties built prior to 1991 but not after, had driven tensions in the city’s rental market to new heights.

A series from the CBC titled No Fixed Address, that profiled the plight of journalist Shannon Martin, who was forced to move out of her apartment after her rent was doubled, only fed growing public fury that more wasn’t being done to improve rental housing security.

The Wynne government is attempting to address this with the Fair Rental Plan, which will implement rent controls for all private units regardless of when they were built. The new legislation also proposes a rule requiring landlords to compensate tenants one month’s rent should they evict them in order to occupy the unit themselves, or for a family member. Landlords will also need to provide a written statement to the Landlord and Tenant Board proving they intend to reside in the unit for at least one year.

Prior to this change, landlords claiming they needed to use the unit for personal or family use could effectively evict tenants without recourse. This measure is in efforts to curb the practice of landlords making this claim to break a lease and relist the unit at a heightened rate.

A Lack of Supply

That there simply isn’t enough housing to go around – and it’s getting tougher to buy more – is a common refrain from market experts, including the Ontario Real Estate Association. With so much red tape and fees, trying to build new property isn’t as appealing as it should be. One of the measures proposed is a $125-million five-year plan that will encourage the construction of new rental buildings with a rebate on a portion of the development charges.

The government has also promised to free up land they own to be used for rental housing development. Both the Room to Grow plan and the Greenbelt’s anti-sprawl policies have been holding up land for 10 years. The Growth Plan has forced cities to build more densely and only within their boundaries, while the Greenbelt has protected farmland around the GTA from being developed.

Foreign Buyers and Investors

Foreign investment has also become an issue. One of the new measures in play is a 15 per cent tax on buyers who never plan to step foot in the country. Many Canadians currently trying to buy in this sellers’ market feel that this is not enough—that the government should apply the rule Australia and Switzerland have–where no foreign investment is allowed at all.

Migratory demand also means that, beyond growth from immigration, those moving from smaller cities within the country to be closer to Toronto for better job opportunities are also increasing demand on the shrinking supply. Over 100,000 people move to the Golden Horseshoe area every year. One of the measures announced to combat this is the empty homes tax, which will allow city governments to tax homes and rental units that remain empty, encouraging owners to rent and sell instead of sitting on property.

On-Assignment Speculation

Speculative activity is also at play—meaning those with the means are buying up homes they aren’t going to use knowing they can turn a quick profit in this market. One new measure listed in the government’s plan includes taking a look at things contributing to excessive speculation like “paper flipping”—where a buyer enters into a contract to buy a pre-construction unit and sells it before closing so they can avoid paying tax on it.

The problems seem to grow every year, and only time will tell if these new measures do anything to help those struggling to find reliable, affordable housing.