Ontario slaps 15% tax on foreign buyers in plan to cool housing
The Ontario government moved forward Thursday with initiatives to rein in the housing market, with 16 new measures to control real estate including a 15-per-cent tax on foreign buyers and expanded rent control rules.
Called Ontario’s Fair Housing Plan, Premier Kathleen Wynne said the plan has been in the works for weeks after months of consultation.
“The skyrocketing cost of renting or buying in Ontario and the Greater Golden Horseshoe in particular is the unwanted consequence of a strong economy with a promising future,” said Wynne at a press conference, also blaming speculators for rising housing prices and landlords for gouging renters. “When young people can’t afford their own apartment or can’t even imagine owning their own home, we know we have a problem.”
The Toronto Real Estate Board said this month that March prices across the region were up 33 per cent from a year ago, while condo research firm Urbanation Inc. said condominium rents rose 8.3 per cent in the first quarter from a year ago.
Effective immediately, the nonresident speculation tax (NRST) that deals with foreign buyers will be 15 per cent on all property purchased in the Greater Golden Horseshoe, home to nine million people.
“With the tax, we are targeting people who aren’t looking for a place to raise a family; they are only looking for a quick profit,” said Wynne.
The tax will have exemptions, such as for skilled workers in the Ontario worker nominee program and refugees.
The new plan will expand rent control to include all buildings in Ontario constructed after 1991, which previously had allowed landlords to demand whatever rent they wanted. Those buildings will be subject to regulated rate increases tied to inflation, currently 1.5 per cent. “We have all heard the stories of rent gouging going on in today’s market. It’s wrong. And it is not at all fair.”
To appease landlords and developers, the government said it would align property tax rates for new purpose-built rental apartments and other residential properties. The government will also bring in a rebate program for development charges.
There are questions of how well any plan will work, given the strength of the economy and the cheap cost of borrowing. The Bank of Canada this month passed on the opportunity to raise interest rates.
“Given that it’s virtually costless to borrow (after inflation), there should still be plenty of oxygen to keep this fire going, hopefully at a more contained rate,” said Doug Porter, chief economist with Bank of Montreal.
As part of the measures, the city of Toronto will have the power to impose a tax on vacant homes. Other municipalities will have the same opportunity. “(The measure) will encourage owners to sell or rent their unoccupied units,” said Finance Minister Charles Sousa.
Municipalities will also be allowed to provide a higher tax on service land approved for development, something the government thinks will help spur housing development of vacant lots.
Ontario will also crack down on assignment clauses, which allow a buyer who hasn’t closed a purchase to pass on the right to buy a property. “There are speculators who enter into agreements to purchase property with no intention of buying them or living in them, crowding out families who want to buy their own home,” said Sousa.
He believes those “scalpers” are avoiding tax “and should pay their fair share” so the government will now be demanding full disclosure, if a property has been transferred through an assignment clause.
When young people can’t afford their own apartment or can’t even imagine owning their own home ... we have a problem.