Ontario eyeing tax increases for ‘property scalpers’
TORONTO Ontario Finance Minister Charles Sousa is giving strong hints that the government’s much-anticipated house affordability package will include measures targeting real estate speculators, or as he calls them “property scalpers.”
In public comments last week, Sousa said speculators are reselling contracts for pre-construction homes multiple times before closing, using assignment clauses.
“There are those who go into new developments, buy up a slew of properties, and then flip them, while avoiding paying their fair share of taxes,” he said. “I call them property scalpers.”
However, the finance minister admitted there’s no data to show how widespread “property scalping” is in Ontario.
A similar practice — called “shadow flipping” — became increasingly common in Vancouver. It typically involved a real estate agent reselling the same previously owned home multiple times before the closing date, driving up the price of the house, sometimes by hundreds of thousands of dollars.
In May 2016, the B.C. government put in place new rules that require real estate agents to draft offers that require the seller’s consent to a contract transfer, and any resulting profit to be returned to the seller.
In Ontario, according to Sousa, property scalping involves only new developments.
“What’s worse is young families who are actually trying to get into the queue, into the lineup to buy that first home, are getting crowded out,” he said.
Sousa’s office would not comment on whether the government would introduce rules similar to those imposed in British Columbia, but the finance minister has floated a number of possible measures, including implementing a tax on foreign buyers, vacant homes and speculators.
He has said that at least some of the housing measures will be included in the Ontario budget, set to be tabled April 27.
Assignment sales are not illegal, but Sousa said he wants to close a loophole that allows so-called property scalpers to treat their profits as capital gains — which means only 50 per cent is taxable. His efforts to get the Federal Finance Minister Bill Morneau to include capital gains changes in the federal budget were unsuccessful.
The two finance ministers and Toronto Mayor John Tory will meet Tuesday to discuss house affordability in the region.
The provincial government’s lack of data on the housing market and other real estate-related issues, and Sousa’s comments on “property scalpers” — admittedly based on conversations he’s had with some developers — are causing some concern among builders.