Premier Wynne announced new legislation today to curb housing prices in Toronto.
Here are my thoughts:
A non-resident speculation tax. Premier Wynne says it will apply only to non-Canadian citizens or residents who don’t live or work in Ontario, and only in the Golden Horseshoe. It will apply immediately.
If the tax doesn’t apply to those living and working in Ontario, I don’t have a problem with it. Where it was problematic in BC was where it applied to people who were planning to live and work in the province.
It will not apply to steelworkers and other exempted groups, refugees, and those who work for four years or study in Ontario for one year afterwards (I think I got those timelines right). But instead of exempting these folks upfront, it sounds as if they will get a rebate after those time requirements have been met. (I’m not sure if I heard this correctly.)
My question is: how much of a factor are foreign non-resident buyers in the Toronto market? If it’s only 3-4%, as I’ve heard anecdotally, it’s not going to make any difference in prices.
There are no statistics, however, as there is no current data. Charles De Sousa, the housing minister, says there are around 6,000 vacant units in Toronto but I’m guessing that’s an estimate as there is no real way of knowing.
How will this tax apply to students and workers who are in the queue , i.e. who have purchased a home but are waiting to close the deal? The new rules may come into effect today but do they apply to purchases entered into before today? If so, and if those folks have to come up with that additional 15% now and then wait to get the rebate, it could be a real problem for them and create real hardship. Waiting for the details on this one.
Expanding rent controls. These will now apply to units built after 1991 as well as those before. I don’t have a problem with this at all.
New Standard Lease. This is a good idea; I’ve seen some pretty wonky leases that were drafted by landlords that included some pretty bizarre and one-sided clauses that (surprise!) favoured the landlords.
A new development charge rebate program. The plan is to work with municipalities to reduce some of the development charges imposed by them on developers. This is intended to reduce cost of building new rental buildings. Good plan if it helps; recent mortgage financing changes at the federal level has made it harder for these developers to get financing at all. If the federal government stepped in to reverse those changes and make financing easier, this could make a huge difference.
Provincial lands. Ontario will use some of the surplus Crown land to build new housing.
Paper Flips. This will apply to assignment clauses, where a purchase is assigned before closing to another buyer at a higher cost. It doesn’t sound like the practice will be prohibited; instead, the government will require disclosure so it can make sure it collects the appropriate land transfer taxes.
It doesn’t seem to address the situation where the seller gets less than fair market value for their property because they rely on a realtor who brings them a buyer, and then “flips” the property to another buyer by assignment, which is what the BC legislation addressed. (Apparently this was a big problem in the Lower Mainland). In BC, to address this issue, they required not only disclosure but also that the seller get all the profits from the assignment.
One situation I hope isn’t caught up in the new rules are the purchase of units in pre-construction condos, where investors buy several units with no intention of living in them, counting on the underlying value of those units to go up before the building is completed. If that practice is banned, it will be hard for a lot of developers to move forward, as it is often those buyers who provide the 70% in presale value needed for developers to actually build those buildings. Again, I look forward to seeing the details.
Lower municipal tax on new apartment buildings. This should help increase supply, again, if developers can get financing. Hoping the feds loosen up those new mortgage rules a little.
Real Estate Agents. Wynne promises a review of the rules around things like double-ending. Frankly, I’d be thrilled if they ended this practice –I think it is rife with conflict of interest. I simply don’t do it. In multiple offer situations, it absolutely gives the listing agent an advantage. I’ve posted before about the conflict of interest in trying to represent buyers (who want to pay as little as possible) and sellers (who want to get as much as possible) should be obvious to everyone. I’ve also seen situations where listing agents have held off on presenting offers while they rustled up their own. But for now, nothing’s changed.
Vacant Home Tax. The new legislation will empower Toronto to enact one. I’m not sure how this would work. Snitch line? Self-reporting? Watch for a whole new underground business to develop around house-sitting.
So overall, did I hear anything that’s going to reduce those crazy Toronto prices? Not much, to be honest. They all seem like good ideas, and down the road, it may help tenants if there are new builds going up as rentals. But I’m not sure the foreign buyer home tax will make a difference for long, and if it’s not implemented fairly, it could cause hardship to those who come to Toronto to work or study.