This is a government policy problem. Taxes won’t fix it.
If you’re looking to break the ice at your next Toronto cocktail party, just mention real estate.
Every day brings fresh headlines like this: ‘Toronto home prices soar 33.2% year over year’. The average price of a Toronto home jumped over that period from from $688,000 to $917,000. That’s 11.7 times the city’s median income. Contrast that with other markets, such as St. John’s, where the average house costs $262,000 — three times the city’s median income — and you can see why Torontonians are choking on their canapes.
Naturally, this state of affairs brings with it the usual calls to ‘do something about it’. Home affordability groups, big banks and, naturally, politicians are all offering up solutions, most of them in the form of a tax — a Vancouver-style foreign buyers’ tax, a vacant homes tax, a speculators’ tax.
An extension of rent control is being proposed to curb rent increases in a market where the vacancy rate sits below 1 per cent. Not to be left out of the conversation, Finance Minister Bill Morneau has called for a meeting with Toronto Mayor John Tory and provincial Finance Minister Charles Sousa ahead of the provincial budget, set for April 27. The budget likely will contain some measures designed to address the housing crisis. For the federal Liberals, there’s ample incentive to try and take credit for it in the vote-rich region of the GTA.
But the cure could be worse than the disease — partly because we have no idea what the disease really is, or how we got it. Are foreign investors to blame? Domestic investors? Immigrants? The Ontario Municipal Board? NIMBYism? The Green Belt? Low interest rates?
The list of potential culprits is longer than the average bidding war for a house, which can feature dozens of offers and mean months of frustration for potential homeowners.
The available data suggest foreign buyers are not the culprits behind Toronto’s white-hot housing market. A survey by Ipsos done for the Toronto Real Estate Board found that foreign buyers accounted for 1,061 sales in 2016, just 5 per cent of all sales across the GTA. Of those foreign buyers, 40 per cent were purchasing the home as a residence, 25 per cent with the intention of renting it out, and 10 per cent as an investment property that they planned to leave vacant.
Read the full article on iPolitics.