Commentary: Why Wynne’s no-win plan won’t fix Toronto’s real estate bubble
Stay calm, folks. Canada’s least competent government just announced its plan to tackle the country’s most complicated problem. What can go wrong?
The government is Kathleen Wynne’s Ontario Liberals, and the problem is the soaring cost of housing and rentals in the Greater Toronto Area (and, increasingly, areas beyond even the furthest reaches of that already vast, populous tract).
The Ontario Fair Housing Plan, released Thursday, includes a 15 per cent “non-resident speculation tax,” limiting rent increases to inflation plus 1.5 per cent, and trying to spur construction of affordable housing by opening up provincially-owned land for development and rebating some of the development fees for a five-year period.
None of the ideas are particularly outrageous, taken in isolation, even though I can’t claim to be wild about some of them. But, again in isolation, none are likely to accomplish very much, either. The Liberals are clearly hoping against hope that a series of small moves packaged together may be helpful without accidentally blowing up the whole economy.
That’s only a very slight dramatic exaggeration. Real estate underpins a frightening amount of Ontario (and Toronto’s) economic activity. It’s the bedrock of our financial system, the core of many pensions, the best shot at a decent retirement for millions of residents, and, via land transfer taxes, a massive source of income for the provincial and Toronto governments. If real estate goes down and stays down for long, we’re all in serious trouble — and not just in Ontario. This would be national.
Now, in fairness to the Liberals, it is exactly the scale of the problem that has compelled them to act. It’s a classic “damned if you do, damned if you don’t.” If the Liberals sit back and do nothing, and the market eventually (inevitably) sharply corrects, they’ll get blamed for the pain of that. “Why didn’t you stop this from happening?” Ontarians will demand. So they’re acting, thus risking being the cause of — a sharp correction. “How could you do this?” the very same voters will ask then.
WATCH: What’s with the Toronto housing bubble?
Fair enough. Over the last year or so, the Toronto market genuinely has begun to show starkly clear signs of a bubble, and rampant market speculation. It’s difficult for elected officials to do nothing, even when nothing is arguably the right call. Voters don’t reward forward-thinking inaction while going through short-term pain.
There’s actually an argument to be made that things should just play out naturally, and one could point out that many decent, hard-working Ontarians have done extremely well in the current housing market. They aren’t bad guys to be vilified; who can begrudge someone who worked hard and played by the rules, lucking into a comfortable retirement earlier than planned by virtue of owning a house.
It’s luck, I know, but since when is luck not a part of a free market? Since when is it, despite the very name of the plan, fair?
But that’s an unpopular argument, and despite my usual strong free-market preferences, even I’ve been rattled by the signs of a runaway bubble forming all around me. I get the argument for intervening, even if I’m not entirely sold on it. So to that extent, with the Liberals having chosen to proceed, I wish them well. Sincerely.
I do own a detached house in Toronto. The surge in property value has been good for my theoretical bottom line. But I’m well aware of the dangers of a bubble to society at large, and I genuinely feel for those who haven’t been able to find housing within their budget. So good luck, Premier Wynne. Truly.
But how can anyone familiar with this government’s record have any faith in this plan?
I could fill a dozen columns reiterating the many failures of the Ontario Liberals over the last 14 years. (I’ve written dozens of columns doing exactly that!) The central point, though, is that this is a government that has had all sorts of whiz-bang plans, and in every case, felt they’d avoided disastrous unintended consequences.
They were going to revolutionize our health care with electronic records, clean up the environment (and create new jobs) by revamping the energy sector, save lives by operating a superb air ambulance service, and bring cleaner, more transparent government to Queen’s Park (along with a hundred other things).
WATCH: Canada’s luxury real estate market
They’ve basically failed in all of them, often in such catastrophic forms that they’ve had no choice but to utterly abandon their efforts, turn tail and apologize. Kathleen Wynne, recall, began her time in office by publicly and repeatedly apologizing for the utter debacle the government made of the attempt to build new gas-fired power plants in Toronto’s suburbs. She’s been apologizing and backtracking ever since, including, just in recent months, for the gigantic mess her party has made of the province’s energy sector.
I genuinely believe they mean well. But good intentions only buy so much of my esteem. This is a government that never, ever, seems to learn from its mistakes — the main mistake being believing that they’re smart enough, their government nimble enough, to make the economy do what they want it to do, produce the desired outcomes, without creating as big a mess as they set out to fix in the first place, despite all the times they’ve already done exactly that. They just can’t learn.
So here we go again.
“What we’re aiming to do is to bring in some initiatives… without having unintended consequences,” the premier said on Wednesday. Her finance minister, Charles Sousa, struck a similar note that day, saying, “We’ll be coming out with a suite of options… intended to stabilize market activity without unintended consequences.”
It’s good, I suppose, that the premier and Mr. Sousa at least recognize the risk of unintended consequence. What’s less encouraging is that they seem utterly oblivious to the fact that their record in office has basically been one gigantic, slow-moving unintended consequence. They’ve only survived through the incompetence of their rivals, and a generous application of public money for nakedly partisan ends (which they eventually had to apologize for, as well, of course, while also revamping the entire political fundraising system and triggering several police investigations — no doubt consequences they did not intend or foresee).
And yet now, after all this, they expect Ontarians to believe that this time — for the first time — they’ve figured out a plan that’ll be all good, no bad, and won’t have any unintended, unforeseen consequences, even though the problem with unforeseen and unintended consequences is that you don’t plan on them or see them coming. Despite their record, we’re supposed to have faith that they’ll pull it off.
I hope they do. But consider the record of this government. Consider the complexity of the issue. Consider what’s at stake. And tell me, honestly, how good do you feel about any of this?
© 2017 Global News, a division of Corus Entertainment Inc.