The Ontario government has revealed 16 new measures designed to stabilize the province’s real estate market, provide greater protection for renters, and crack down on speculative investment in the region.
In a live announcement from Toronto’s Liberty Village, Ontario Premier Kathleen Wynne, joined by provincial finance minister Charles Sousa and Aurora-Newmarket MPP Chris Ballard, unveiled the new Ontario Fair Housing Plan – and kicked things off by confirming a foreign buyers tax will indeed be introduced in the Greater Golden Horseshoe.
An Ontario Foreign Investment Tax
A 15% Non Resident Speculation Tax (NRST), will be take effect immediately, and will apply to non-permanent residents, non-citizens, and non-Canadian corporations purchasing residential property in the GGH. However, a full rebate on the tax will be provided to those who become a permanent resident or citizen within four years of their home purchase, and to students enrolled in a full-time two-year post-secondary program.
Speculation on whether such a tax would come to Ontario (specifically the Greater Toronto Area) has raged following the implementation of one in Metro Vancouver in August 2016. It’s an abrupt change of stance for Wynne, who stated at the time that she didn’t feel a foreign buyer tax was a fit as Toronto and Vancouver are completely different markets. When pushed by the media on her turnaround following the announcement, however, Wynne stated that “the situation has changed.”
“We’ve heard from economists and realtors, and we know that a 33 – 40% (home price) increase is a new reality in this region, and that’s why we’ve worked to put together a plan to address these concerns… We have determined a non-resident speculation tax is needed because this speculation needs to be addressed,” she stated to the media scrum. She also made it clear that the tax shouldn’t be interpreted as an anti-immigration measure.
“The Non-Resident Speculation Tax has nothing to do with new Canadians or people who want to make Ontario their home,” she said. “This is targeting people who are not looking to raise a family, who are just looking for quick profit or a place to park their money.”
According to the Zoocasa’s Housing Trends and Sentiments Report, the concept of a foreign buyers tax is popular with two thirds of Canadians – 61% feel foreign buyers are driving up home prices in their city, with an addition 69% supporting a tax in their region. Not surprisingly, this is most pronounced in British Columbia (75%) and Ontario (66%).
New Rent Controls Proposed
The next big revelation is legislation proposing sweeping rent control in all private rental units, including those built after 1991 – a bombshell move in response to intense media and consumer scrutiny following skyrocketing rents in Toronto, in some cases by as much as 100%.
Wynne dismissed the fear that doing so would dissuade developers from creating rent-purpose buildings – a concern raised by several industry pundits – saying it “just does not hold water”, and that these measures will provide tenants with the expectation that their rent won’t rise higher than inflation.
Ballard, who has been a champion behind the rent control issue, also revealed the legislation will include a proposed amendment for landlords to negotiate starting rents at current market rates.
“It’s clear that families on tight budgets are feeling the pinch of dramatically rising prices as the rental and real estate market struggle to keep up with demand,” he said. “It will make everyday life more predictable and fair for Ontarians.”
Related Read: 5 Tips to Get Ahead in Toronto’s Rental Market
The Ability to Tax Empty Homes
The province will also empower the City of Toronto, and potentially other municipalities, to introduce a tax on vacant homes, similar to the one introduced this fall in Vancouver – in the west coast city, a 1% levy on a home’s total value is charged to homeowners who leave their dwellings empty for a minimum of six months per year.
A Crackdown on “Property Scalpers”
Sousa says a main focus for the province will be addressing the practice of “paper flipping” – when a buyer enters a contractual agreement to buy a residential home, and assigns it to someone else prior to closing, effectively driving up the price. “These scalpers may be avoiding tax,” he said. “We will require full disclosure if a property is transferred through an assignment clause.” He added that the province will work alongside the Canada Revenue Agency to ensure taxes are paid in full.
Other initiatives include:
Less red tape: The plan will identify barriers to housing development projects in order to improve supply. The province will create a Housing Supply Team to work directly with developers and municipalities.
Incentives for rental developers: A $125-million, five-year program will encourage the construction of new purpose-built rental apartments by rebating a portion of the development charges.
Free up land for new homes: The Plan will also work with municipalities and other partners to identify provincially-owned surplus lands that could be used for affordable and rental housing development, including parts of Toronto’s West Donlands, and areas close to Hamilton.