For years, astronomically high housing prices in the Greater Toronto Area have made homeownership next to impossible for would-be buyers operating on a budget. Construction firms have attempted to cool conditions down by increasing development, but they haven’t been able to keep up with the pace of demand, not to mention other obstacles that have stymied production.
Enter the Ontario government, which recently announced steps it’s taking to make the current real estate market more affordable, both for buyers as well as renters.
On April 20, Ontario Premier Kathleen Wynne unveiled the province’s Fair Housing Plan, comprised of 16 comprehensive measures that officials believe will help drive prices lower. Installing rent controls for all private rental units, updating the Residential Tenancies Act so that it’s more in line with today’s market norms and implementing a 15 percent tax that would affect buyers and investors who don’t originate from Canada are among the proposed steps. Known formally as the Non-Resident Speculation Tax, or NRST, the tax also applies to non-Canadian corporations purchasing between one and six residential housing units in the Greater Golden Horseshoe. According to government figures, nearly 70 percent of Ontario’s population lives in the GGH and accounts for 26 percent of Canada’s overall populace.
Wynne noted that these measures are being implemented so hard-working Canadians can realize the fruits of their labors.
“People work hard to provide for their families,” Wynne said. “They should be able to rent or enter the real estate market without making great sacrifices or taking on a huge amount of risk. At the same time, we recognize the need to protect the significant investment homeowners have made.”
Wynne further stated that it’s her belief the Fair Housing Plan applies the appropriate balance, which should help to normalize the housing market, which currently favors sellers more than it does buyers.
Prices climbing at alarming rate
It isn’t so much that home prices are rising that’s necessitating government action, but rather the pace at which they’re climbing. For instance, according to official estimates, the average selling price for a single-family residence in Toronto in March was $916,567. That’s 33 percent more than the same period in 2016. Because asking values have been so expensive in the GTA, it’s affected average selling values in Canada as a whole. Based on the most recent figures from the Canada Real Estate Association, the typical for-sale house in March was purchased for nearly $550,500, approximately 8 percent more than 12 months earlier. However, when prices from the GTA and Greater Vancouver are excluded, the average drops to a more reasonable $389,726.
Charles Sousa, Ontario’s Minister of Finance, indicated that the province’s proposal should bring greater parity to the housing marketplace.
“Everyone deserves housing choices that are affordable,” Sousa explained. ‘Ontario’s Fair Housing Plan is a thoughtful way to address the recent price increases in our housing and rental market so that affordable housing is available to people and meets the diverse needs of our communities.”
Plan met with criticism
But everyone isn’t on board with Ontario’s plan of action. For instance, the Federation of Rental-housing Providers of Ontario says that it would actually do more harm than good by bringing excessive red tape to the development process. According to the FRPO’s figures, no fewer than 20,000 units that were set to begin production will now have to be reviewed so that it aligns with the newly installed legislation.
Jim Murphy, FRPO’s president and CEO, indicated that the policy announcement has the potential to cancel out many of the gains the rental market has experienced.
“This year was on track to be the best for new rental construction in decades, but this sudden decision to change the rules has thrown that all into doubt,” Murphy warned. “FRPO anticipated the potential harm these sweeping legislative changes would have on the industry- and on tenants- and sought opportunities to work with the government on viable alternatives. Our efforts to engage were not successful, and we are now seeing the consequences of the government’s decisions.”
Murphy further stated that while the legislation likely won’t put all development projects under greater scrutiny, the thousands that would be could exacerbate the supply crunch.
The Canadian Taxpayers Federation is also critical of the Ontario government’s plan of action, saying – among other things – that it would discourage foreign buyers from investing in Canada’s economy.