Ontario Announces 16 Steps to Cool Runaway Toronto House Prices

Michelle Cohen Headshot

Michelle Cohen Headshot

Leading up to the announcement, back-to-back years of double-digit gains in Toronto's average home prices, non-resident buyer speculation, lack of affordable housing, ballooning rental rates, and low housing supply, have all been cited as factors in what is being diagnosed as an increasingly unsustainable housing market.

The tax - part of proposed legislation unveiled on Thursday by the Ontario provincial government - will be levied on houses purchased in the Golden Horseshoe, an area that stretches from the Niagara region and the Greater Toronto Area to Peterborough.

British Columbia applied a 15 per cent tax against foreign buyers previous year and saw the price of homes drop.

The measures are aimed at cooling down a hot real estate market in the Greater Toronto Area, where the average price of detached houses rose to $1.21 million last month, up 33.4 per cent from a year ago.

"The supply-and-demand situation was already starting to level out without any additional taxes", she said.

Ontario Premier Kathleen Wynne said new measures are need to cool rents and home prices which are rising far faster than people's paycheques.

"We need to put mitigations in this system", the treasurer said in Toronto where he announced an investment of nearly $190 million over three years to support the "Career Kick-Start Strategy". The change will mean annual rent increases for all tenants who stay in their rental housing will be limited to Ontario's inflation-based guideline (which this year is set at 1.5%), unless the landlord gets approval from the Landlord and Tenant Board.

The plan also offers some relief for tenants in buildings built before 1991, who were already covered under rent control.

The foreign buyer's tax in British Columbia appears to have helped bring that skyrocketing market under control.

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The HPI benchmark price measures the value of a typical home in a given housing market, taking into account things such as lot size, age, and number of rooms. It would match the 15 percent tax on foreign home buyers that the Pacific coast city of Vancouver has implemented.

"The timing (of Wynne's plan) is most disappointing given that it's our spring market and we also have a real uptick in the last 10 days in terms of inventory", said Dianne Usher, senior vice-president of Johnston and Daniel, a division of Royal LePage.

Paul Kershaw, leader of youth advocacy group Generation Squeeze that campaigned to end the exemption, called it "a win for renters".

"I hope anything the government of Ontario does will be accompanied by measures that substantially encourage the construction of affordable rental housing".

But he noted that the impact of policy changes is hard to predict, and there is a risk of fallout beyond the housing market in other pockets of the banks' consumer credit business that includes credit cards and auto loans.

- A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties.

"Certainly in Hamilton I don't think there are foreign investors in Hamilton, unless you count Toronto", said Richard Harris, a professor at McMaster University who studies real estate and the Hamilton housing market.

What Sousa didn't say is that the Liberals have more than doubled Ontario's debt to more than $300 billion since coming to power in 2003, which has made Ontario the most indebted sub-sovereign (non-national) borrower in the world.

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