Ontario sets foreign housing tax to cool market

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Ontario's Fair Housing Plan consists of sixteen measures that the provincial government hopes will increase affordability while cooling-or alternatively stabilizing-runaway housing markets, including the implementation of new rent control measures and a foreign buyer tax. "My objective is to make sure that what we do helps people". As for the underlying data guiding these policy decisions? But it's hard to shake the feeling the government is, in several important ways, flying blind.

The number of sales in Metro Vancouver plunged in the months after the new tax, though signs have since cropped up that the market may be bouncing back. In Ontario, even that won't work if the province has misdiagnosed the problem: If prices in Toronto are a matter of scarce apartment supply and high domestic demand, no amount of taxing foreign investors is going to ease pricing.

Simply increasing taxes on home ownership could lower the value of Toronto real estate, while doing nothing to increase the supply of homes, bringing with it the worst of both worlds.

The tax would be imposed on buyers in what is known as the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations.

"You're looking to raise your family and grow in the community and you're being outbid and outpriced by people that are just using it as a commodity", said Fred Altbaum, 34, a marketing professional struggling to buy a home with his wife and daughter. Only people who have no connection to the local labour market would pay.

In a bid to cool the red-hot luxury residential market, Vancouver imposed a punitive 15 percent tax on foreign buyers in the city. Rather than try to get a handle on the issue, Ontario policymakers sat idly by.

The province promises to introduce legislation that would enable Toronto and other cities to introduce a vacant home tax on empty homes.

"It's a great start", she said, but called rent control only "one piece of the pie".

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The government will also introduce legislation that would, if passed, add new measures to the Residential Tenancies Act.

As we wait - and wait - for the Ontario budget to come down, we're also waiting to find out what the government is planning to do about housing affordability. But in "I Pencil" Leonard Read demonstrated over half a century ago that nobody can know what all the things required to make a humble pencil do cost, from paint to loggers' coffee, let alone what they "should" cost.

The national sales-to-new listings ratio was 67.4 per cent in March compared with 68.3 per cent in February. But the government did not provide any information on the prevalence or frequency of the practice.

The problem is, our governments appear to be considering the wrong bullets. It would simply be reassuring for the public to know that policymakers are guided by research and firm data, instead of reacting to frothiness in a real estate market that's been foaming for years. Ottawa, says Carleton professor emeritus and housing expert Allan Moscovitch, is a fairly flat market. "The move comes with more exemptions, and it was well telegraphed", Kavcic states in a note.

How do you think these new measures will affect Toronto's ongoing housing crisis and real estate industry? It was because people felt that new immigrants were presenting competition for jobs. If anything, the package might be too tepid.

CIBC economist Benjamin Tal said he doesn't believe there are enough foreign buyers in the Toronto-area market for the tax to have a lasting effect.

Ontario Finance Minister Charles Sousa has said he's concerned about speculators "playing the market" and therefore limiting supply.

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