Ontario is cracking down on the red hot housing market by introducing a series of incentives that will, hopefully, control inflating real estate in the Golden Horseshoe region.
The province plans to bring in a series of 10 different initiatives to help placate the housing and rental markets — but the proposed regulations are a mixed bag. The non-resident speculation tax (NRST) is the primary regulation the Ontario Liberals hope to pass and the plan has immediately fallen under criticism. NRST would tax individuals that are not citizens or permanent residents of Canada 15 per cent when they purchase a home. The tax would apply to transfers of land, including “single family residences, detached homes and condos”. It would not apply to residential apartment buildings. This tax is similar to the foreign buyer’s tax in Vancouver, but differs because it would allow people to refund the tax if they obtained permanent residency within four years of living in the home.
NRST is one of the less impactful initiatives announced Thursday morning because it only applies to foreign buyers and doesn’t adequately represent most of the buying market in Toronto. Blaming foreign buyers for the problems of a mostly localized Canadian real estate market echoes the xenophobic tendencies seen lately in the United States, and won’t help the housing sector in a large or meaningful way. Why not instead implement a vacancy tax so that local homeowners, including foreign buyers, wouldn’t be allowed to keep their homes empty? This would directly respond to the desperate need for housing in the city.
Luckily, one of the other initiatives does leave room for municipalities throughout the province to enact a vacancy tax if they so wish. This puts the onus on each individual city to make the decision, which is either an avoidance tactic or a way to appease a heightening tension between Canada’s largest city and the province. The province will also crackdown on assignment clauses, which allows a buyer to pass on the right to another person to buy a property, and is a ‘scalping’ strategy to avoid taxes.
In the renting sector, the province will allow rent control again, which was banned in 1991. This will prohibit landlords from raising rent by more then 2.5 per cent, which has recently become a massive problem in the Golden Horseshoe. This is a positive change for renters who are currently at the whims of greedy landlords without rental control in place. The province also plans to strengthen the Residencies Tenancy Act to further protect renters from corrupt landlords.
The province of Ontario is finally taking action on the over-inflated housing market in the Golden Horseshoe, but it still stands to ask whether the initiatives introduced are too weak? By introducing a non-resident tax, the province avoids tackling the larger issue. With an election around the corner, the province may be hesitant to bring the hammer down on wealthy homeowners. Hopefully, the City of Toronto takes the initiative instead and enacts a vacancy tax on behalf of the province.
That being said, the incentive to crack down on speculation driving the market up and re-introducing rent control are fantastic incentives for the province. It remains to be seen what the new regulations will actually do for Ontario — but it will be clear what works and what doesn’t have an incredible impact on the red-hot housing sector.
