Top 3 Things Missing From The Ontario Housing Announcement

This morning, the Wynne government announced a series of 16 measures designed to make Ontario’s housing fairer for families and individuals.

Unfortunately, these measures seem to be more focused on the mounting pressure for the government to do something, anything, to cool, correct and stabilize the burning-hot market rather than bullseye measures to impact the greatest issues we’re facing.

Now – that’s not to say that the measures are without merit or purpose. The suite of regulations will certainly impact the market in some way and the dedication towards increasing affordable housing and managing the rental market are surely welcomed. But in terms of the glaring issue of housing costs increasing 33% month over month in the city, I think the Liberals have missed the mark.

GTA House Hunt

A house listed at 1,599,000 we visited last weekend in the Armour Heights area. 

Leading up to the announcement, there were strange comments coming from the Liberal camp about measures that would impact affordability but not devalue current equity levels experienced by existing homeowners. This felt strange, and for good reason. The measures outlined today will in large part protect this inflated “equity” without providing an opportunity for new buyers to jump into the market.

The government has enacted measures that promote the appearance of ‘doing something’ but will have minimal impact on the largest issue at hand: demand for property, any property, in the raging Toronto housing market. As someone who has been housing-hunting for three years now, I’m not feeling relieved in the slightest outside of the fact that my condo is now rent-controlled. After a lot of lip service to potential buyers, I feel let down by a government that seems content to allow housing to be a commodity instead of a place to live.

Top 3 Things Missing from the Ontario Fair Housing Plan:

  1. Taxing domestic property flippers

In the Fair Housing Plan, those who speculate by purchasing pre-construction properties and assigning the sale before close will be penalized. This means that real estate agents, investors and other speculators who buy up swaths of pre-construction condos and homes will be taxed. Paper flippers, if you will.

Unfortunately, this does not address a far more common problem in Ontario, and in Toronto specifically: average Canadians moonlighting as property speculators and flippers.  While foreign speculators are targeted by this plan, the Wynne government has conveniently left out any measures that would calm the rampant flipping and speculating by the Canadian next door. Now, they have opened up the door for Toronto to implement a vacancy tax, which is helpful. But this does not prevent someone from occupying a property for a short period of time themselves with the intent to flip it for profit.

Purchasing a property to live in creates a different mentality than purchasing a property as a commodity. Canadians faced with the notion of paying a mortgage each month, a property tax each year and, eventually, having to re-negotiate a mortgage on said property behave differently than those who are happy to put 5% down, take a monthly loss and eventually flip the property for a profit. It’s decidedly unfortunate that the Wynne government has chosen to ignore this practice in exchange for the more politically palatable choice of taxing foreigners.

  1. Impact on foreign buyers purchasing homes for their satellite families

With that said, although there will be a 15% speculation tax on foreigners effective immediately, the ‘speculation’ aspect of said tax creates many loopholes that foreign buyers are certain to attempt to take advantage of. These loopholes include a rebate on the tax for students attending an educational institution for 2 years and an exemption for a foreign national who has a spouse who is a Canadian citizen or permanent resident of Canada if they jointly purchase the property with said spouse.

In plain speak, this means that the practice of foreign buyers parachuting their income-less families into Canada for purposes of schooling and homemaking will continue. It also discounts the foreign backing many local Canadian residents have. When considering foreign buyers, it’s important to realize that not all make the transactions themselves – many choose to flow money through local Canadian family members or friends who purchase property on their behalf and in their own name. While there are deterrents in place to this, governments and banks will need to follow the money to make sure this isn’t happening.

While this measure has one of the largest potential impacts of cooling the market, the loopholes may make this tax an empty threat.

  1. Measures to reduce or manage bidding wars and improve transparency

The most discouraging exclusion from the Fair Housing announcement was regulation for the real estate industry around bidding wars. A lack of transparency in bidding wars puts purchasers at a large disadvantage during what will likely be the largest financial transaction of their lives.

There is overall a lack of information shared with potential buyers during the bidding process, including the number and dollar value of other bids. It’s not uncommon for sellers to request another round of offers and for potential buyers to “improve”. They often do so without knowing what exactly they’re improving upon, leading to frenzied cash-throwing and often bidding hundreds of thousands of dollars over the ask price.

A policy to create transparency in the bidding process through standardizing the offer process, sharing information around bid amounts and, ultimately, reporting sale prices in a publicly available forum would have likely had the desired impact of cooling the market or, at minimum, of providing necessary information on all sides of the table.

I’ll be watching the market closely in the next few weeks as the changes start to have their impact. I will say that the number of listings landing in my inbox each night have grown exponentially – from 5 – 10 to more than 77 today – as rumblings about potential regulations increased.

What do you think the impact of the regulations will be? Do you think you’ll be able to purchase in the coming months if you, like me, have been on the hunt for quite some time? Let me know in the comments…