It was one year ago that the Ontario government unveiled its 16-part “Fair Housing Plan”, blindsiding buyers and sellers and effectively chilling housing markets throughout the Greater Golden Horseshoe (GGH).
The pack of measures was announced by Premier Kathleen Wynne on April 20, 2017 in Toronto’s Liberty Village neighbourhood. Flanked by provincial finance minister Charles Sousa and Aurora-Newmarket MPP Chris Ballard, she revealed Ontario would introduce its own foreign buyer’s tax (called the Non-Resident Speculation Tax), as well as new rent controls for all units within the province.
The psychological market reaction was swift. Home prices within the Greater Toronto Area plunged 20.3 per cent by May, a decline that remained consistent throughout the following months; March 2018 sales measure 40 per cent below last year’s historic activity.
Not surprisingly, sentiments on the plan were mixed. Some felt the government had no place meddling in the free market, with others felt it was just the right medicine to cool unsustainable conditions; home prices had soared 33 per cent year over year in March 2017.
Now, 12 months in, do Canadians feel positively about the Ontario Fair Housing Plan as well as measures introduced in other markets?
To find out, Zoocasa surveyed 1,431 respondents from across Canada for our second annual Housing Trends Report. Here’s what Canadians have to say regarding foreign buyer’s taxes and rent cap measures.
Support Remains Strong for Foreign Buyer’s Tax
Ontario’s NRST follows in the footsteps of British Columbia’s foreign buyer’s tax, charging an additional 15 per cent on home purchases made by non-citizens or non-permanent residents within the GGH. (BC has since expanded its tax to 20 per cent, and increased the affected geographic area beyond Metro Vancouver.)
“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,” stated Wynne as she announced the tax. “We have determined a non-resident speculation tax is needed because this speculation needs to be addressed.”
Affected buyers who become citizens or permanent residents within a year’s time, or are enrolled in a full-time two-year post-secondary course, receive a full rebate on the tax.
However, the only hard data on foreign ownership suggests its impact is minimal – numbers from Statistics Canada and the CMHC reveal it accounts for just 3.4 per cent of homeownership in Toronto and 4.8 per cent in Vancouver. Despite this, survey results reveal Canadians are strongly in support of taxing foreign buyers at 68 per cent, relatively unchanged from the 69 per cent reported last year.
Further, perception persists that foreign buyers are responsible for driving prices higher in Canada’s hottest markets; 59 per cent believe this to be true, slightly lower from 61 per cent in 2017.
Perhaps not surprisingly, support for a foreign buyer’s tax is strongest among British Columbia respondents at 77 per cent (+ 1 per cent from 2017), followed by 70 per cent in Ontario, flat from last year.
As was the case with Zoocasa’s 2017 findings, support for such a tax extends beyond markets where foreign investment is considered an issue.
Sixty-five per cent of Albertans supported a tax, despite only 40 per cent agreeing foreign ownership impacts home prices in their region. Sixty-seven per cent of respondents from Saskatchewan and Manitoba were in support, with 51 per cent agreeing it was an issue, while 58 per cent of Atlantic respondents reported support, despite only 30 per cent feeling foreign ownership impacted their local affordability.
Interestingly, support for a foreign buyer’s tax has declined considerably in Quebec, from 77 per cent in 2017 to 47 per cent this year, with slightly fewer respondents (48 per cent from 50 per cent) feeling it impacts market prices. The Montreal housing market, which is not subject to a foreign buyer’s tax, has been particularly hot over the last year, drawing speculation that it may have become an investment destination for out-of-country buyers turned off by the taxes now in place in Ontario and BC.
Perhaps more perplexing is that while respondents report clear support for a foreign buyer’s tax, they don’t necessarily feel it’s effective. Just 5 per cent of British Columbia respondents agree affordability has improved in their region as a result, with 63 per cent disagreeing, and 32 per cent unsure. In Ontario, 16 per cent of respondents believe the tax has helped affordability, with 47 per cent disagreeing, and 37 per cent unsure.
Rent Controls: Harming or Helping?
The introduction of over-arching rent controls for all units in Ontario was a game changer, and remains one of the most heavily debated aspects of the FHP. All rents are now capped at the provincially-mandated annual increase, regardless of when they were built, or whether they’re privately-owned units or rental-purpose dwellings. Previously, only units built or introduced to the rental market prior to 1991 were rent protected, leading to a two-tiered system that allowed landlords of newer to raise rent as much as they wished upon lease renewal.
With Toronto’s rental vacancy rate falling to 1 per cent – well below what’s considered sustainable – this led to astronomical rent hikes, in some case, of 100-per cent or more.
“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,” stated Chris Ballard. “It will make everyday life more predictable and fair for Ontarians.”
While the measure was applauded by tenants everywhere, the development industry was quick to cast its criticism, saying the cap would ultimately shrink available supply and push rents even higher. They argued private investors would be less inclined to rent their units out, while rental-purpose projects would be cancelled or modified; in fact, since the announcement, 1,000 planned rental units have been shut down, or redeveloped as ownership condos.
According to Zoocasa’s data, thought, Canadians feel rent control is working, with more than half Ontario respondents agreeing their affordability has improved; 56 per cent agreed, 25 per cent are unsure, and 19 per cent disagree.
However, more than a third of Ontarians believe the rent caps have increased rent prices overall – 36 per cent agree, while 40 per cent are unsure, and 24 per cent disagree.
They also worry that the new guidelines will make it harder for them to find an affordable unit should they move, with 47 per cent in agreeance, 33 per cent not sure, and 21 per cent disagreeing.
And, while the new rent caps have convinced 57 per cent of renting respondents to remain in their units for longer (27 per cent said they were unsure, while 16 per cent disagreed), they haven’t changed their minds regarding homeownership; 54 per cent disagree they’re less interested in buying a home, while 25 per cent aren’t sure, and 21 per cent agree.
You can view or download the full report on Canadian homeownership and renting sentiments here.
