Ontario confirms plans to boost housing supply
Ontario Finance Minister Charles Sousa has announced plans to increase the supply of available housing in the Toronto region, as a launching point to tackle the housing crisis in Canada’s biggest city. In a highly anticipated meeting with Finance Minister Bill Morneau and Toronto mayor John Tory, Sousa confirmed that details of his government’s initiative to address the city’s lack of housing supply will be made public this coming week.
Sousa also hinted that there would be further measures to address the overheated housing market in the upcoming provincial budget on April 27.
“It’s a Made In Ontario solution that is unique. We know demand is extremely high, with speculation being the driver. We also know that there is supply in the region, but the key thing is to make sure that supply is expedited into the existing marketplace,” Sousa told reporters at a press conference this afternoon.
There is some disagreement over whether a lack of supply is boosting home prices at a rate never seen before. Ontario’s Growth Plan for the Greater Golden Horseshoe, which limits the building of detached homes continues to irritate developers. Others blame the City of Toronto, arguing that Tory’s government has shuffled their feet for far too long in approving new developments.
But all three policymakers acknowledge that speculation is indeed a key driver of the unprecedented pace at which Toronto’s home prices have gone up. However, no concrete measures were announced to specifically address foreign and domestic speculation, other than a vague commitment by the federal government to boost resources to the Canada Revenue Agency to ensure compliance of tax law within the real estate sector.
“We don’t want to create any additional demand for housing,” said Morneau, in response to a query about the possibility of imposing a tax on foreign buyers of property similar to the one instituted in Vancouver last August.
Vacant Home Tax
Toronto Mayor John Tory confirmed that his government would look into the idea of imposing a tax on vacant homes in Toronto.
The vacancy rate in Toronto — that is, the number of homes available to rent is in the range of 0.9 to 1.2 percent, an all-time low. Speculators, both domestic and foreign, tend to treat property like any other investment vehicle — they see no necessity to rent out a condominium unit, for instance, because occupancy of the unit will reduce its overall value. This has led to a huge number of vacant dwellings in the city. In fact, the latest figures estimate that there are approximately 99,000 homes in Toronto that are owned but unoccupied, and could be on the rental market.
“We will be lobbying all levels of government to increase the supply of rental housing,” Tory told the media. “But let’s be clear — the situation won’t be fixed overnight.”
Data from the Canadian Real Estate Association (CREA) released today show that home prices in Toronto increased 6.2 percent in the last one month alone. Between March 2016 and March 2017, the average price of a Toronto home increased by roughly $200,000 or 33 percent.
The CREA statistics also show strong evidence of the spillover effect from Toronto’s frothy market. Average sale prices have surged more than 20 percent year-over-year in towns surrounding Toronto like Hamilton, Guelph, Kitchener-Waterloo, St. Catherines and Niagara Falls. With the exception of Hamilton, none of these towns are considered suburbs of Toronto.
According to a poll conducted by data collector Campaign Research, more than six in 10 Toronto residents would like to see the federal government initiate measures to tackle the housing crisis. The poll also showed, perhaps unsurprisingly, that younger Canadians were more likely to want the government to intervene in the housing market. The average price of a single, detached home in Toronto stands at a ridiculous $1.2 million right now, while the average price of a two bedroom condominium can range anywhere between $400,000 to $700,000.
But not all camps are in favour of government dipping its hands in the real estate market. Phil Soper, the CEO of Royal LePage, one of Canada’s biggest real estate firms, has warned that any kind of hasty intervention in Toronto’s housing market would have repercussions across Canada.
“The introduction of new real estate-related regulations or taxes in Ontario, in the absence of data and analysis to support these policy moves, could lead to a sharp price correction, impacting not only household wealth, but damaging the broader Canadian economy as well,” said Soper in a release.
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Cover: Chris Young/The Canadian Press