Ontario’s Fair Housing Plan

The Ontario government has announced what it calls the Fair Housing Plan. Their aim is to try to cool the real estate market in the Greater Golden Horseshoe area. Here are the 16 Proposed New Rules with my comments in brackets.

1. A 15-per-cent non-resident speculation tax to be imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations (similar to what was implemented in the Vancouver market – unfortunately the government has very little data as to how big an issue foreign investment really is).
2. Expanded rent control that will apply to all private rental units in Ontario, including those built after 1991, which are currently excluded (Strangely many landlords did not know that they could increase rental amounts by more than the guidelines for units built after 1991).
3. Updates to the Residential Tenancies Act to include a standard lease agreement, tighter provisions for “landlord’s own use” evictions, and technical changes to the Landlord-Tenant Board meant to make the process fairer, as well as other changes. (This is something that I don’t agree with – Ontario’s rental rules already favor the tenant over the landlord).
4. A program to leverage the value of surplus provincial land assets across the province to develop a mix of market-price housing and affordable housing.
5. Legislation that would allow Toronto and possibly other municipalities to introduce a vacant homes property tax in an effort to encourage property owners to sell unoccupied units or rent them out. (In my opinion, this is a good thing – no houses should sit vacant in a community).
6. A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties. (This is supposed to help make it more attractive for developers to build rental housing).
7. A five-year, $125-million program aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges (Same as #6 above).
8. More flexibility for municipalities when it comes to using property tax tools to encourage development (This could be a good idea – other countries, notably Panama, have used this to make it more attractive for foreigners to buy new housing rather than existing homes, thus preventing competition and large price increases for the existing housing stock).
9. The creation of a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions.
10. An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market. (The Ontario Gov’t wants to crack down on what they have labelled “Property Scalpers” but they don’t have reliable data on it, so not sure how they will fix it or even whether or not it is a big problem).
11. A review of the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions. (My understanding is that the gov’t wants to ensure real estate salespeople don’t “double-end” sales or at least have more openness if they do).
12. The launch of a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures and any additional steps that are needed
13. Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction. (As above, I think double-ending a deal may become a thing of the past).
14. A partnership with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario (This is a follow up to what the federal gov’t recently implemented so people don’t try to count vacation properties or investment properties as their principle residence).
15. Set timelines for elevator repairs to be established in consultation with the sector and the Technical Standards & Safety Authority.
16. Provisions that would require municipalities to consider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes, among other things (The government through the Ontario Municipal Board has required builders to build more higher density housing, such as condo buildings, so this could ensure they build larger units that could accommodate families).

I do believe something needed to be done to cool the housing market. 33% price increases are not sustainable and not healthy. The housing market has been on-fire for several years now and it surprises me that it took so long for the government to do anything about it. In my opinion the government should have been compiling data on foreign investment and speculation over the last couple of years and would have been better informed to make effective changes now.

We should remember that there is more to our housing market than rising home prices. Some estimates say that housing and related consumption account for over 80% of our GDP, so a major hit to our housing market could reverberate through the rest of our economy.

It remains to be seen if the changes put forth will have the desired effect. In the short-term I believe the market will soften because many potential home buyers will take a wait and see approach with the uncertainty that surrounds new rules. In the longer-term the housing market is driven by supply and demand so if supply is not increased and the demand doesn’t change than we will see home prices continue to rise.