A full calendar year has passed since the Ontario Fair Housing Plan hit the market, including the province’s very own foreign buyer tax (the Non-Resident Speculation Tax, or NRST).
The FHP was in response to mounting pressure on policymakers to address declining home affordability: March 2017 GTA real estate prices clocked a mammoth 33 per cent year-over-year increase, while outdated rent increase guidelines paved the way for predatory rent hikes come lease renewal time.
So, 12 months in, have the taxes and rent controls actually improved affordability for home buyers?
To find out, Zoocasa polled just over 1,400 Canadians on their sentiments regarding recent policy measures — and while they appear to like them, they’re not sure they’re actually working.
Support Remains Strong For Foreign Buyer’s Tax
Ontario’s NRST follows in the footsteps of BC’s foreign buyer’s tax, requiring those who are not Canadian citizens or permanent residents to pay an additional 15-per-cent tax on any home purchase within the Greater Golden Horseshoe. This applies whether it's condos for sale in Toronto or Hamilton houses.
The tax has been viewed as a controversial — or even protectionist measure. Though Wynne was adamant the goal of the tax was not to discourage newcomers to Canada from purchasing real estate in the province.
“The Non-Resident Speculation Tax has nothing to do with new Canadians or people who want to make Ontario their home,” she says. “This is targetting people who are not looking to raise a family, who are just looking for quick profit or a place to park their money.”
Those who become a permanent resident or citizen within a year of their purchase, or are enrolled in a two-year full-time post-secondary program, receive a full exemption from the tax.
According to Zoocasa’s survey, Canadians are heavily in favour of taxing out-of-country buyers.
Looking at respondents from all provinces, 69 per cent stated their support, while 61 per cent believe foreign ownership directly impacts home prices in their local housing market.
While support remains highest in provinces that actually have the tax — 77 per cent in BC and 70 per cent in Ontario — respondents from provinces where foreign ownership is not perceived as an issue are also in favour.
Sixty-five per cent of Albertan respondents support the tax, despite only 40 per cent feeling out-of-country buyers impact regional home prices.
This is reflected in Saskatchewan and Manitoba, where 67 per cent are in support, despite only 51 per cent believing it’s an issue. And Atlantic provinces, show 58 per cent support, and only 30 per cent perceive it impacts their local markets.
These findings are roughly unchanged from the data collected by Zoocasa on the same topic in 2017.
However, sentiments shifted significantly in Quebec, with 30 per cent fewer respondents in favour of a foreign buyer’s tax. This compared to last year (47 versus 77 per cent).
As well, slightly fewer respondents (48 per cent versus 50 per cent) feel foreign ownership impacts their local market. This is interesting as there is increased speculation that foreign investors, dissuaded from purchasing in markets where a tax is present, have shifted their attention to La Belle Provence.
And that shift is particularly due to the Montreal market, which has had banner first-quarter sales.
(Graphic courtesy of Zoocasa.com)
Data Does Little To Change Perception
Support for the tax remains unshaken, despite new hard data on the extent of foreign ownership in Canada’s hottest markets: Numbers released in partnership from Statistics Canada and the Canada Mortgage and Housing Corporation (CMHC) reveal foreign activity accounts for just 3.4 per cent of ownership in Toronto, and 4.8 per cent in Vancouver.
But here’s the real kicker — while Canadians express widespread support for a foreign buyer’s tax, they don’t actually feel it’s effective.
Just five per cent of BC respondents felt affordability had improved in their region as a result of the tax (63 per cent disagree and 32 per cent are unsure).
Ontarians are slightly more optimistic at 16 per cent, with 47 per cent disagreeing the tax has improved prices, and 37 per cent unsure.
A Mixed Reaction To Rent Controls
Rent affordability has been a hot topic throughout Ontario and especially in the City of Toronto, where the vacancy rate remains below one per cent. An outdated provincial policy that capped annual rent increases only for units built prior to 1991 created a two-tiered system. And so tenants became vulnerable to rent increases well above the provincial guideline.
To even the playing field, and to improve housing security for tenants, the FHP mandated all units would now be rent controlled, with annual rent increases capped at the prescribed provincial percentage.
While hailed by renters, landlords and developers were quick to denounce the controls.
Such a change would only reduce supply in what was already an incredibly tight market, they argued, as reduced profits would discourage private investors from renting their units out. Builders warned that fewer rental-purpose projects would come to fruition, as developers favour more lucrative condo projects.
The majority of Ontario survey respondents (56 per cent) do feel they’ve improved their affordability (25 per cent are unsure, and 19 per cent disagree). However, an additional 36 per cent feel rent controls have increased rent prices overall (40 per cent are unsure, and 24 per cent disagree).
While others remain concerned that the new guidelines will make it harder for them to find an affordable unit should they move.