TORONTO – Ontario plans to help cool a hot housing market by bringing in a 15-per-cent foreign buyer tax, expanding rent control, allowing Toronto to impose a tax on vacant homes and using surplus lands for affordable housing.
Premier Kathleen Wynne announced Thursday that a non-resident speculation tax will be imposed on buyers in the Greater Golden Horseshoe who are not citizens, permanent residents or Canadian corporations. The area, which stretches from the Niagara Region to Peterborough, Ont., is home to about 9 million people and is one of North America’s fastest growing regions.
Once legislation passes, the non-resident speculation tax would be effective retroactively to April 21.
The tax is not about targeting immigrants, Wynne said, and a rebate would be available to people who subsequently get citizenship or permanent resident status, as well as foreign nationals working in Ontario and international students.
“The non-resident speculation tax has nothing to do with new Canadians and people who want to make Ontario their home,” she said. “With this tax, we are targeting people who aren’t looking for a place to raise a family – they’re looking only for a quick profit or a safe place to park their money.”
Despite the focus on foreign speculators, the government has admitted it doesn’t have good data on the real estate market. As of Monday, however, homebuyers are required to give information about their residency and citizenship status and how they intend to use the property.
VIDEO: Ontario plans to help cool a hot housing market by bringing in a 15-per-cent foreign buyer tax
The Ontario speculation tax appears similar to one British Columbia implemented in Metro Vancouver last August, when foreign nationals purchasing property were slapped with a 15 per cent levy. In January B.C. Premier Christy Clark announced the tax would be lifted for those who have a work permit in order to encourage more people to come to the province to work.
The number of sales in Metro Vancouver plunged in the months after the new tax, though signs have since cropped up that the market may be bouncing back. In the Greater Vancouver area, the price of a home rose 12.3 per cent year-over-year to $1,179,482, according to a Royal LePage report released this week.
In the Greater Toronto Area, the average price of detached houses rose to $1.21 million last month, up 33.4 per cent from a year ago.
Skyrocketing demand and rising cost of housing is the “unwanted consequence” of a growing economy, but the province’s new measures will make the process of finding a place to live a little easier, a little less frantic and a lot fairer, Wynne said.
“When young people can’t afford their own apartment or can’t imagine ever owning their own home, we know we have a problem,” she said. “And when the rising cost of housing is making more and more people insecure about their future, and about their quality of life in Ontario, we know we have to act.”
The province’s housing package will also expand rent control, which currently only applies to units built before November 1991, after tenants in newer units complained of dramatic spikes in rent. New rules would see all private rental units fall under annual rent increase guidelines. Those have averaged two per cent in the last 10 years and this year it is 1.5 per cent.
VIDEO: Ontario to impose rent controls pegged to rate of inflation
Tenants groups welcomed the move. However, Geordie Dent, executive director of the Federation of Metro Tenants’ Associations, noted the rent control will come too late for tenants who’ve recently seen outrageous rent increases.
Tenants will benefit from the government’s additional move to standardize rental agreements, Dent said, which will mean landlords won’t be able to hit tenants with extra fees and charges.
Some economists have warned that rent control will discourage developers from building new rental properties. To offset that, the government has also introduced a five-year, $125-million program to rebate a portion of development charges on new purpose-built rental properties in areas with low vacancy rates.
Ontario is also giving Toronto and other interested municipalities the power to impose a vacant homes tax to encourage owners to sell or rent such spaces – something Toronto’s mayor has been pushing for.
Federal finance minister Bill Morneau welcomed Ontario’s housing package, saying the measures aren’t aimed at increasing demand, but instead look at ways to deal with speculation in the market.
“The move forward with an approach to dealing with potential speculators we hope will have an impact on reducing the speculative nature of what’s going on in the market,” he said.
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The provincial Liberal government’s housing plan contains 16 measures in total.
Rules for real estate agents will also be reviewed, in particular practices such as double ending, where the agent represents both the buyer and the seller.
Ontario will also establish a program to identify provincially owned surplus lands for affordable and rental housing, with an eye to using a few specific sites such as the West Don Lands in Toronto for pilot projects.
Neither of Ontario’s opposition parties objected to any of the government’s proposed measures.
Ontario NDP MPP Peter Tabuns had proposed the same rent control measure in a private member’s bill, and said he was pleased to see the government move forward on that. Progressive Conservative Housing Critic Ernie Hardeman said the measures are moving “in the right direction.”