The Ontario government has recently unveiled a series of sweeping changes in an effort to tame the red-hot housing market in the GTA and Golden Horseshoe. In the past year alone, housing prices have shot up by an average of 33% in the region. The reasons for this rapid acceleration are complex, with high demand, a shortage of supply, and the persistence of a low interest rate environment sustaining this prolonged boom.
In response to these developments the government has sought to intervene in three main ways, namely by taking actions to address demand for housing, action to protect renters, and actions to increase the supply of housing. Let’s discuss each of these in turn:
Measures to address housing demand: The government plans to introduce legislation that if passed, would implement a 15% Non-Resident Speculation Tax (NRST) in the Greater Golden Horseshoe on the prices of home purchased by individuals that are not Canadian citizens, or by foreign corporations. This region includes the entire Greater Toronto Area, and the Golden Horseshoe that straddles the Niagara corridor.
The main purpose of this legislation is to control the unsustainable demand for housing, and to ensure that home ownership remains affordable. The NRST would apply to transfers of land that include at least one but no more than six family residences. “Single family residences”, such as detached and semi-detached homes, townhomes and condominiums would be under the purview of the NRST.
There are some exceptions to this rule, as refugees and nominees under the Ontario Immigration Nominee Program would not be subject to the proposed tax. The NRST would also not apply to transfer of land including multi-residential apartment buildings, commercial/industrial lands and agricultural land.
This proposal if passed would apply retroactively to April 21, 2017.
Measures to protect renters: The government is introducing new rent control measures to apply to all private rental units in Ontario. Whereas rent controls in their current form apply only to units built prior to 1991, these new measures will introduce new measures to apply to all private units built onwards from 1991, and would make them subject to the annual provincial rent increase guidelines.
The purpose is obviously to ensure that rates of rent are affordable and predictable for tenants, without sweeping increases that make rental housing unaffordable. Over the last ten years, the average rate of annual increase has been 2%, and annual increases have been capped at 2.5%. Landlords can still apply for vacancy decontrol and above guideline increases where permitted by the Residential Tenancies Act.
These measures if introduced would apply retroactively from April 20, 2017.
Measures to increase the supply of housing: The government does also intend to introduce a series of measures to increase the available supply, so that the greater availability of housing will lead to a more affordable and predictable housing market in the GTA and southern Ontario. Among the highlights, the government intends to:
These changes are wide ranging, and a good lawyer can help put your mind at ease if you are about to undertake a real estate purchase, in Vaughan, the GTA and York region.