House-price frenzy will go on

Premier Kathleen Wynne’s remedy for southern Ontario’s housing market crisis amounts to putting a bandage on a deep flesh wound.

She and her Liberal government may staunch the bleeding — for a time.

But the injury requires radical surgery that goes far beyond anything prescribed last week by Wynne’s Fair Housing Plan. That there’s a serious problem, everyone agrees. A detached home in Toronto now costs $1.5 million — a 33 per cent increase in one year. In neighbouring municipalities, it’s hit $1.1 million. That’s crazy.

Waterloo Region has not escaped this trend. After prices rose by 20 per cent in the past year, the average house now fetches $500,000. These are sweet times for sellers — and disastrous for buyers. Some observers say we’re witnessing the rise of a landed gentry in southern Ontario — where only the rich can afford the single, detached homes desired by so many people, including increasing numbers of millennials.

As for middle-income Ontarians, they can buy a home in outlying regions and commute for four hours a day, or rent a big-city apartment.

The failure of the Liberals’ action plan is that it addresses only one of the many factors driving up real estate prices and does little for all those unlucky, middle-class folks.

Low interest rates, population growth mainly due to immigration, lack of supply and foreign speculators all feed the market frenzy.

The province can’t change those irresistibly low interest rates. Nor can it — or would it want to — stop people moving here. The country needs immigrants.

So, in order to be seen to be doing something and win political brownie points, Wynne zeroed in on one factor — speculation — and hit foreign buyers with a 15-per-cent tax.

The Vancouver experience, where a similar tax was imposed, suggests this could limit wild price increases — but only for six months.

It’s telling that a government that prides itself on making “fact-based” decisions doesn’t know how many foreign speculators are out there. That study is to come.

Where this government could really help people is by doing more to boost housing supply.

The Liberals’ growth and land-use policies demand greater population densities in Toronto and surrounding urban areas, including this region. In practice, this has severely limited the number of new detached and semi-detached homes being built in the past decade — even as demand for such housing soared.

It’s telling that in London, Ont., which does not face these restrictions, the average detached home recently cost only $350,000.

Regrettably, the province’s strategy for increasing supply is both weak and vague.

It will create a “housing supply team” with provincial employees mandated to find barriers to specific housing projects and work with developers and municipalities to create solutions.

The real answer would be to overhaul provincial growth and density regulations and get more housing built.

But this is a government distrustful of markets that move too freely. Its own policies fuelled skyrocketing housing prices. Now, its ideological straitjacket will keep it from bringing those prices back to Earth.

And for more and more Ontarians, the dream of owning a house will remain just a dream.