It has been an eventful day for Toronto’s City Council, and the region’s housing affordability is the topic du jour. Mayor John Tory met with a roundtable of experts, including Ontario Real Estate Association CEO Tim Hudak, on potential measures to cool price growth and speculative activity in Toronto real estate.
The average detached house in Toronto hit $1,573,622 in February, reports the Toronto Real Estate Board, as inventory – available homes for sale – has reached a 15-year low at less than one month’s worth of supply in the city’s most popular neighbourhoods.
Following Vancouver’s Footsteps
While there’s no “magic wand” solution to the scorching hot market, one potential point of action could be taxing vacant homes, as Tory announced to media following the discussion. Such a tax would be similar to the one implemented in January in Vancouver, which charges homeowners a full 1% of their home’s value should it sit empty for more than six months per year. That could equal tens of thousands of dollars for luxury and detached houses priced in the multi-millions – a typical price point in Vancouver.
The Case for an Empty Homes Tax
There are an estimated unoccupied 65,000 homes in Toronto according to Statistics Canada data – units that can be returned to the increasingly-tight rental market.
“I look at housing as a place to live for people who live in this city, and if a tax we might put on vacant homes, and we are not there yet, incentivizes just a few of those 65,000 people to put those houses back into the supply, then we will have made a difference,” Tory said. “That is what I look at as my responsibility, not to look after the investment of those who choose real estate for that purpose. They will be ok.”
The mayor emphasized that the tax, while a “legislative possibility, isn’t a hard reality just yet; Statistics Canada is currently cross referencing their data with Toronto Water and Toronto Hydro records to determine which homes are truly empty. A report will then be drafted on how to effectively tax empty units.
Affordability a Top Focus for City and Province
Improving affordability for Torontonians and those living in the GTA has become a provincial focal point as well as municipal – Finance Minister Charles Sousa recently implored his federal counterpart Bill Morneau to increase the capital gains tax bracket on the sale of non-principal residence homes as an effort to combat speculative buying and selling.
While the federal government declined to include such a measure in their recent budget, Ontario Housing Minister Chris Ballard has confirmed that there will be some housing affordability measures revealed when the province’s own upcoming budget announcement.
City Council Lends Support to Affordable Rent Measures
The lack of affordable rent options in Toronto has also been a hotly debated topic, as prices rise higher in tandem with real estate and housing demand.
At the epicentre of the discussion is the rent protections “loophole”, a measure put in place in by the Mike Harris government which repealed rent controls on rental housing built after 1991. The move was made to encourage the creation of more rental stock – the fear was developers wouldn’t be interested if they were subjected to strict rent controls – but critics have argued the loophole has been woefully ineffective, as condo development has far outpaced that of rentals.
Related Read: 5 Tips for Getting Ahead in Toronto’s Rental Market
A proposal recently made by NDP MPP Peter Tabuns that calls for an expansion of rent controls to buildings built after 1991 was proved popular with city council, and backed by a 32 – 11 vote – with the notable exception of the mayor himself.
Though Tory stated he is looking forward to reviewing what the province has in store, his office released only this statement to CBC Toronto to explain his lack of support on the rent control proposal:
“The mayor wants to keep Toronto affordable and liveable for residents. He believe the issue of rent control is complex and requires more in-depth debate.”
It’s clear homebuyers and renters alike are putting pressure on policymakers to provide relief for growing affordability challenges in the GTA and province. It remains to be seen how today’s proposals will be implemented, and how effective they’ll be in actually improving the ability of home seekers to rent and purchase homes.