Given the rising prices of the housing market in Canada, the different provinces are taking measures to cool the markets and make housing more affordable for the average resident. The policies adopted by the Ontario administration, though reflecting the steps that other regions are taking, may not be getting the desired results.
In fact, experts are pointing out that a year down the line, Ontario’s regulations could result in more challenges for homebuyers and renters in place of assisting investment in the Greater Toronto Area. It might be a wiser move for Ontario to formulate customized measures to improve the housing situation in the province and not adopt the policies implemented elsewhere.
The 15% Foreign Home Buyer Tax
In an attempt to curb the rising estate prices, the B.C. government levied a 15% homebuyer tax on foreigners looking to buy property. Soon after, Ontario also levied a 15% non-resident speculation tax on homes purchased in the Toronto and outlying areas that together make up the Greater Golden Horseshoe. Levying taxes on foreigners is an easier political move since they don’t have voting privileges. In addition, policy-makers were under the impression that property prices were rising quickly because foreigners were relying on property investments to safeguard their capital.
However, research conducted by Professor Andrey Pavlov of Simon Fraser University found that the impact of foreign investment in Vancouver was very different from the effects in Ontario. Further, figures gathered by the CMHC and Statistics Canada showed that non-residents owned only 3.4% of the residential estate in Toronto. As for the total number of homes built after the year 2016, a negligible 6.45% were purchased by foreigners.
New Measures Adopted by the NDP Government
Right after getting elected last month in B.C., the NDP government adopted 30 policies in an attempt to slow down rising estate prices. One of the proposed policies is a speculation tax on domestic and foreign investors. Before Ontario brings in a similar tax, the administration might want to carefully evaluate the need for the tax and the possible fallouts. That’s because Ontario does not have an impressive track record for bringing in favorable reforms.
One good example is the rent control levied and the regulations imposed on raising rents. While this measure was intended to protect the interest of renters, it also resulted in various projects getting cancelled that were focused on building homes for the sole purpose of renting. As of today, home renters pay the highest rates in Toronto making it highly difficult for residents to collect enough savings for a down payment on a house.
Ontario Needs to Implement Affordable Housing Policies
The Ontario administration is now focused on protecting the home equity of baby boomers, but at the same time, it is also attempting to make buying homes more affordable for Millennials and first-time homebuyers. To make this happen, the government could initiate certain reforms:
Lower Transfer Tax
Lowering the transactional cost of property by canceling the entire provincial land transfer tax for residents buying a home for the first time – This measure could help since the land transfer tax is a closing cost that accounts for a major expense.
Taking long-term measures to promote the building of more homes and raising the supply of available property for residents – The government must take into consideration other factors that push property prices like the Places to Grow Act that forces builders to construct higher structures on smaller pockets of available land. Making changes in the Act could assist developers in speeding and streamlining the planning, coordination, and execution of building projects.
In conclusion, the Ontario administration has a better chance of controlling skyrocketing property prices if it can implement policies that will resolve the housing issues while putting aside concerns about winning the next elections.