A Critical Look at Ontario's Fair Housing Plan

By Penny Elizabeth Dutkowski, Broker

Yesterday's blog briefly outlined the majority of Ontario's 16 point Fair Housing plan that will apply to Toronto and the Greater Golden Horseshoe Area and the gist of what they're intended to do and when.  There's no doubt the plan was introduced to try and cool the GTA's housing market and little doubt the measures were meant to appease locked out buyers and tenants. 

The plan will be detrimental to homeowners, landlords, non-residents owners and tenants. Everyone is going to feel it. The graphic sums up the moving effect I anticipate the measures will have on the market - a surge in listings and rentals, fewer sales, and investor losses. The very end of it tells the tale.

Behind the graph is...

Non-residents:

Far too many rose-coloured glasses wearing pundits are saying the changes will have no effect but as yesterday's blog noted, the cummulative effect has finally come home to roost. Where for example a $1 million property was purchases in Toronto by a non-resident, the cost to them has jumped and immediate 15% or put another way, they've lost $150,000 worth of value. That along with land transfer tax amounts to a combined 18.9%. Add another 1% vacancy tax and they're paying a 20% premium to buy a property that will face a minimum 7% capital gains tax on any increase, upon it's sale. For the wonderful benefit of sheltering funds in Canada, they'll out even only if their property appreciates by a minimum 20%. 

Considering that the effect of the plan is to cool the market and it will a 20% increase isn't going to happen anytime soon.

Landlords both resident and non-resident:

Then the rent control kicks in on all landlords where as demonstrated in the graphic, the annual tax increases because of the assessment is going to eat up most if not all of that increase leaving the owner to dig into their pocket to cover all the other increases such as utilities, maintenance and repairs.

Locked out Buyers:

They want everyone to believe that were it not for foreigners buying up property and keeping much of it empty, prices wouldn't be so high and they'd be able to afford to buy.

That logic fails miserably because of all the residential properties in Canada, 70% of them are owner occupied meaning that 30% of occupants are tenants. 

Within that 30% tenant ratio are the retirees who will never again own property, students who won't be considering buying until they're fully in the work force, the poor who also cannot afford to buy and those who want to buy but can't afford today's prices. The latter is the minority number of tenants but the ones making the noise.

If their argument then is that they cannot now afford to buy property because the average price of a detached is well above $1 million, a semi-detached $860,000, then what's stopping them from affording condos at $520,000 or townhouses at $600,00 to $715,000 since those were detached prices 3 years ago? 

That question begs consideration of the following:

Salary increases may, if we want to be generous grown by 12% in those three years, meanwhile house prices have tacked on at least 60%. If then there is a significant number of buyers now who can afford $700,000 they most certainly could have afforded to buy 3 years ago. 

The only plausible excuse for not wanting to put out $500 to $700 thousand for a condo or townhouse is because they expect to leapfrog over the natural progression of homeownership as most buyers of property throughout the ages had to do. 

Their excuse is rather flimsy, dubious, even entirely bogus. 

Even if 50% of the 30% of tenants can afford to and will buy when the plan brings down the market, Ms. Wynne would have cratered the market by catering to a rather small number of the population. 

By Penny Elizabeth Dutkowski, Broker 
HomeLife/Bayview Realty Inc., Brokerage-Independently Owned 
and Operated. Thornhill, On. (905) -889-2200

All posts are the express opinion of Penny Elizabeth Dutkowski and should not be construed as that of the Brokerage.