1 – The Ontario Fair Housing Plan
In March, real estate prices and demand had reached a boiling point in the Greater Golden Horseshoe region – and politicians and policymakers knew something needed to be done. Following a Toronto Real Estate Board report that prices were up a scalding 33 per cent year over year, federal Finance Minister Bill Morneau met with his provincial counterpart Charles Sousa and Toronto mayor John Tory to discuss a solution.
What followed was the controversial Ontario Fair Housing Plan, a package of 16 measures designed to address some of the most pressing issues in the real estate market. Announced by Ontario Premier Kathleen Wynne on April 20, it included such bombshells as a 15-per-cent Non-Resident Speculation Tax, as well as sweeping rent caps that require all landlords adhere to the provincial increase guideline, regardless of when their unit was built. Landlords must also now compensate tenants with one month’s rent should they evict them for personal use of the unit, and prove they, or a family member, resided there for at least a year.
To incentivize developers to create more rental-purpose units, the province also announced $125-million in development rebates, as well as freeing up surplus lands for the creation of affordable housing.
The changes have been met with mixed response; that a foreign buyer tax was rolled out without hard ownership data was met with criticism, while developers warned that capping rents would result in fewer rental purpose buildings being created and shrink supply further, regardless of the new incentives. Indeed, several Toronto-based projects, originally intended for rental purpose, have been reverted to more profitable condo use.
2 – The B-20 Mortgage Rules
Some bad news for borrowers – a new policy, to take effect on January 1, 2018, will make it tougher to get a mortgage in the new year. Dubbed Guideline B-20, this rule, introduced by the Office of the Superintendent of Financial Institutions (OSFI), will make it mandatory for all borrowers to be stress tested regardless of the size of their down payment.
While home buyers who pay less than 20 per cent down on their purchase (also referred to as high-ratio borrowers) have been stress tested since October, this new round will also target low-ratio borrowers, who are generally considered to be lower risk as they have more equity up front.
Under the new rules, they’ll need to prove they can pay their monthly mortgage payments at a higher rate – either the Bank of Canada’s qualification rate (currently 4.99 per cent), or 2 per cent tacked onto their contract rate – whichever is higher.
Experts say these changes will have deep implications for buyer affordability, chopping budgets by as much as 20 per cent, and knocking up to 10 per cent of prospective purchasers out of the housing market altogether.
They also warn the changes could have steeper consequences for the housing market than policy makers intend as they will affect move-up buyers as well as first-timers. B-20 will also cut down on the instances of the “bank of mom and dad” footing the down payment bill: rather than squeeze into the low-ratio threshold with a parental gift, all buyers must now prove they could handle higher payments should rates theoretically rise.
3 – The BoC’s Double Rate Hike
It can be argued that the latest generation of home buyers have never experienced a rising interest rate environment – but that all changed this year as the Bank of Canada backed away from the loose monetary policy it has used since the global recession.
Canada’s central bank, which sets the cost of variable borrowing with its trend-setting Overnight Lending Rate, increased said rate twice in 2017, once in July and another in September, hiking it from 0.5 to a full 1 per cent.
The BoC’s qualification rate, which is used by lenders when stress testing mortgage applicants, subsequently rose to 4.99 per cent, while variable rates rose across all lenders.
And borrowers are wise to buckle up, as a strengthening economy will usher in more hikes in 2018. In its December rate announcement, the BoC stated, “While higher interest rates will likely be required over time, Governing Council will continue to be cautious, guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.”
4 – TREB Loses Its Data-Sharing Appeal
The fight to share historical real estate data in the Greater Toronto Area has been raging since 2011 – and came one step closer to realization on December 1, when the Federal Court of Appeals rejected the Toronto Real Estate Board’s latest attempt to keep it private.
TREB, which maintains a database of past sold information, including final sale price, comparable solds, and agent commissions, argued that sharing such data would violate both copyright and client privacy. The court disagreed, upholding a previous Competition Tribunal ruling that withholding such information is anti-competitive and puts clients at a disadvantage.
Previously TREB’s members, which consist of brokerages, individual agents as well as Virtual Office Websites (VOWs, including Zoocasa), could only divulge such information directly to clients when representing them in the market. However, the demand for widespread distribution, whether by publishing it online or sending via an email newsletter, is high, and will provide consumers with valuable information, the court stated.
“… the Tribunal found TREB’s concern with privacy to be unpersuasive. We will turn to this issue in greater detail later in these reasons; suffice to say at this point that, looking at the record before it, the Tribunal found little evidence that TREB’s VOW committee had considered or acted upon privacy concerns before establishing TREB’s VOW Policy,” reads the appeal statement.
It’s a win for market transparency and consumer empowerment, says Lauren Haw, Zoocasa’s Broker of Record.
“The ability to share and display market data (such as past-sold prices) with consumers is a positive development for the real estate industry,” she says. “We strongly believe in a model where consumers are educated and able to work with experienced agents that act in an advisor capacity – not as gatekeepers of information.”
However, TREB isn’t taking this latest development lying down – it has indicated it will appeal once more to the Supreme Court of Canada, and that it will file a motion to suspend any data sharing in the interim.
“TREB disagrees with the decision of the Federal Court of Appeal and will be seeking leave to appeal the decision together as well as an order staying the decision pending the outcome of that appeal, if granted. TREB believes strongly that personal financial information of home buyers and sellers must continue to be safely used and disclosed,” said TREB CEO John DiMichele.
5 – New Capital Gains Tax Requirements
In Canada, homeowners are spared having to pay the 50-per-cent capital gains tax on any profits made when they sell their principal residence – a welcome reprieve as home values have steadily risen over the past decade. However, while no tax is paid on the sale, Canadians must now report it to the Canada Revenue Agency – and that caused new headaches in the 2017 tax season.
Details regarding the sold property’s address, the year it was purchased and final sold price must now be included on tax forms. The new rule applies retroactively to all homes sold in 2016 and will apply to all moving forward. And don’t think you can skirt the rules – if the CRA catches you fudging the numbers, they could remove your exemption altogether, or charge you $100 per month (up to a maximum of $8,000) for every month you do not correctly report your sale.
The CRA is also cracking down on the status of principal homeowners; those claiming the sale must physically reside within the home, rather than just have a family member or spouse live there. The tax agency is also going after pre-construction home sales made on assignment; because such sales occur before a final title is registered on the property, such sellers could be dodging the capital gains tax they owe on their profits. To look into the issue, the CRA has demanded the sales records from 2,800 Toronto-based developers, with plans to do so in Vancouver as well.
6- Tarion Stripped of Regulator Status by Province
In the past, buyers of newly-built homes with defects would report them, and file any ongoing disputes with the builder, to the Tarion New Home Warranty Corporation. The provincial entity was responsible for both regulating the new-build industry, adjudicate any issues between consumers and developers, as well as pay out warranty claims.
It was also the subject of sharp criticism, often accused of negligence in the warranty claims process, and for favouring developers over the consumer. However that will all change moving into the new year, as the province opted to strip Tarion of its regulator status in lieu of a standalone regulator.
“Tarion’s multiple roles and responsibilities can give rise to a perception of conflict of interest, and could result in an actual conflict or conflicts of interest,” stated Consumer Services Minister Tracy MacCharles. “The new home building sector is an important driver of Ontario’s economy and, quite frankly, I believe it deserves a stand-alone regulator.”
The province also announced the warranty program will now include upgrades and amenities, and payout amounts have been increased by 10 per cent, from the previous $40,000 to a minimum of $60,000 and a maximum of $100,000 to better reflect the rising cost of real estate in the province.
7 – Ontario Shuts Down the OMB
The Ontario Municipal Board (OMB), a long-standing governing body that settles planning and development disputes – such as appealing building proposals after they’ve been rejected by the city – was dismantled this year, following a lengthy battle from municipalities to remove it from power.
In its place the province is creating a Local Planning Appeal Tribunal, which is intended to return development planning power to local communities.
The OMB was first established in 1903 as the Ontario Railway and Municipal Board, to govern the expansion of transportation corridors, a booming turn-of-the-century industry. It became fully construction-oriented in 1932.
It has faced plenty of criticism over the course of its storied history – and especially during this decade’s condo boom – for being biased toward developers (of which there were many on its board), and was known to green light projects deemed unsuitable by cities.
Under the new appeal system, rather than assess cases afresh, the Tribunal must focus on whether the city broke any provincial policies or its own laws during its decision making.
8 – An Ban on Double Ending
In October, the province of Ontario proposed strict new legislation to ban the practice of “double-ending”, where a real estate agent represents both the buyer and seller in a transaction and pockets the commission from both.
It’s considered to be an ethically-questionable move, as it’s hard to prove an agent representing both sides of a deal truly has the seller’s best interests at heart while also getting the best deal for their buyer.
It can also be used to blatantly abuse the system and violate an agent’s fiduciary duty to their clients. In a scathing investigation by CBC’s Marketplace, a number of agents in the Toronto area were caught misrepresenting their services to undercover reporters posing as prospective buyers. In some instances, listing agents even guaranteed the sale of the home to a buyer in exchange for representing them in the deal. Such behaviour is a direct violation of the code of ethics (REBBA 2002) that govern real estate agents.
The proposed changes, while not banning the practice outright, will enforce a preference for a Mandatory Designated Representation model, requiring that agents represent only one side of a transaction, and to refer one of the clients to another agent in their brokerage when applicable.
It will also double the fines for those who are caught using unsavory methods, from $25,000 to $50,000 for individual agents and up to $100,000 for brokerages.
The policy change would follow British Columbia’s lead; the province outright banned double ending in September.
Stated BC Real Estate Association (BCREA) President Jim Stewart, “Every day, REALTORS® help their clients understand real estate transactions, so they can make informed decisions. Over my nearly 25-year career as a realtor, many long-standing clients have developed trust with me, and now my clients have no choice but to start from the beginning and build new relationships. Trust is a crucial part of what is often the largest financial transaction in people’s lives.”
9 – New Protections for Condo Owners
On November 1, an overhaul to the Ontario Condo Act took effect, bringing with it greater protections for owners and tougher requirements for board mangers and owners, as well as a new online dispute system dubbed the Condominium Authority Tribunal (CAT).
Part of Bill 106, the Protecting Condominium Owners Act, the new rules will introduce mandatory training for all condo directors and board members via a three-hour online course, and will affect meeting notices for owners, voting procedures, reserve fund rules, and disclosure requirements for those granting vendor contracts. Members will also need to brush up on financial, legal, construction and administration matters.
The measures are “to provide greater confidence and security for condo owners in their investment and greater stability in their day-to-day lives,” said Government and Consumer Services Minister Tracy MacCharles to a crowd at the Air Canada Centre’s Maple Leaf Squre in Toronto. According to MacCharles, there are 750,000 condo units in the province, owned by 1.6 million individuals and run by 10,000 condo boards.
A new system to resolve issues between residents or the board is especially anticipated; the current dispute resolution requires the hiring of a private mediator, which can be an expensive, drawn-out process that isn’t always effective, says the province. A new agency dubbed the Condominium Authority of Ontario will provide a tribunal for disputes, as well as an affordable resolution process – it will cost $25 to enter preliminary negotiations, $50 for mediation, and $125 to take a matter to the tribunal, with the cost footed by the plaintiff.
10 – The National Housing Strategy
On November 22 – also known as National Housing Day – the federal government revealed its $40-billion National Housing Strategy, a “once-in-a-lifetime initiative” designed improve accessibility to affordable housing to the nation’s most vulnerable.
First teased in the Liberal’s federal budget in March, the 10-year plan will kick off a number of goals including:
- $15.9 billion for the National Housing Co-Investment
- $4 billion for the Canada Housing Benefit, which will provide an estimated $2,500 to 300,000 low-income households, to be launched in 2020
- $2.2 billion for the Homeless Partnering Strategy
- $9.1 billion for Community Housing Initiatives
- $2.5 billion for a federal-provincial-territorial housing partnership fund
- $9.8 billion for existing agreements
It will create 100,000 affordable housing units across Canada, renovate an additional 300,000, and remove 530,000 households from core housing need.
However, a number of affordable housing advocates say the plan falls short, failing to address the affordability challenges of the middle class who are facing some of the highest real estate and rental costs in recent memory, as well as extremely tight rental vacancy.
Said Jim Murphy, CEO of the Federation of Rental Housing Providers of Ontario, “We’re increasingly concerned that those in the middle, who probably wouldn’t qualify for most of these programs, are still facing hardship. They can’t afford to own with an average price of $1.3 million (for a detached resale house in Toronto in October). Increasingly, rent is becoming difficult, not only in terms of price but in terms of supply and finding a place.”