Today, the provincial government introduced Ontario’s Fair Housing Plan, which includes 16 measures to help cool Toronto’s hot real estate market.

Below is an overview of the measures and what I think will happen if they get passed – some of them are good, some are bad, and some are just plain ugly…

Rental Housing

What Ontario is doing:
• Expanding rent control to all private rental units
• Introducing legislation to strengthen the Residential Tenancies Act
• Making sure multi-residential apartment buildings are charged property taxes at similar rates to other residential properties
• A targeted $125-million program over five years “to further encourage the construction of new rental apartment buildings”

My Take: By limiting the potential for profit, you’ll also be limiting the attraction of investment funds needed to build new rental units. This could result in less supply, rather than more, leading to higher prices of vacated units.

Foreign Buyers

What Ontario is doing:
• Introducing a 15% “Non-Resident Speculation Tax” in the Greater Golden Horseshoe region
• Partnering with the Canada Revenue Agency to strengthen reporting requirements and ensuring taxes are paid on real-estate transactions

My Take: The Revenue Canada partnership is long overdue. It’s about time we started gathering meaningful statistics on who is buying what.
The “Non-Resident Speculation Tax” while a popular decision could also end up biting us in the butt. There are two types of foreign buyers – the ultra-rich buying luxury houses, and the moderately rich who are buying pre-built condos. The pre-built condo buyers I’m afraid are very much a necessity in this supply stricken marketplace. Honestly, the banks won’t fund new builds without a certain amount of pre-sales and those pre-sales are fuelled by overseas dollars. These foreign dollars are taking the risk that others aren’t prepared to take and for that, they should be entitled to their profits (and losses should it come to that). Without this pre-sale money, you run the risk of a huge part of our economy – construction and development shrinking…and with it supply.

Paper Flipping Controls

What Ontario is doing:
• Working to “understand and tackle” real-estate practices that allow “paper flipping,” which includes using assignment clauses for real-estate speculation
• Reviewing rules for real-estate agents to “ensure that consumers are fairly represented” with a focus on double-ending

My Take: Once again we are limiting the ability to make profit for speculators. This will surely cause speculators to look elsewhere for profits and with them will go – jobs, housing supply and the flow of funds through our economy.

Vacancy Tax

What Ontario is doing:
• Introducing legislation to let City of Toronto “and potentially other municipalities” introduce vacancy taxes

My Take: I am 100% in support of this initiative. I see no downside to this. Likely this will result in an increase in rentals and possibly some more listings.

Other Changes

What Ontario is doing:
• Creating new market housing and affordable housing units with surplus provincial land
• Creating a “Housing Supply Team” to identify barriers to housing developments and to work with developers and municipalities to find solutions
• Establishing a group to advise the government on the housing market and the effects of the newly announced changes
• Educating consumers on their rights in real-estate transactions
• Giving municipalities “flexibility” to use property tax tools to fuel development
• Overhauling standards for elevator repair in conjunction with TSSA
• Working on an updated Growth Plan with municipalities to address density and “an appropriate range of unit sizes”

My Take: These policies are nearly 100% motivated by the demand side of the equation. Your “Housing Supply Team” is bureaucracy at work – instead the government should start making changes immediately that will move properties to the marketplace like:
– Reduction in land transfer taxes
– Reduction in punitive development fees that limit the number of units coming to market
– Incentives for large property developers to push development
– Incentives for domestic banks and funders to finance the developments that are currently relying on – foreign funds

The Bottom Line: this Fair Housing Plan may give the market a pause while buyers reflect on timing and sellers push inventory up but I see no reason why this will affect the market significantly. Let’s also be cognizant of the fact that the construction & real estate industries account for 6.8% & 13.2% respectively of the provincial GDP. Some of these new changes will no doubt cause a ripple effect throughout the entire provincial economy.