This article was submitted by Kevin Crigger, President, Toronto Regional Real Estate Board
Housing affordability is one of the most significant challenges facing Toronto and the entire region. Governments at all levels have started making this issue a priority, thanks in part to the numerous public calls for action made by the Toronto Regional Real Estate Board (TRREB). We are thankful for this, but it’s essential that governments get the solutions right so that we don’t create new or worse challenges.
Recently, City of Toronto Councillor Mike Colle publicly indicated his intention to ask City Council to make a formal request for the provincial government to implement another investor tax, referred to as a “speculation tax”, that would be charged on the sale of non-principal residence homes. This is a bad idea for the following reasons:
- Experts, including TRREB, agree that the current affordability challenges are largely a result of an inadequate supply of housing available for sale and rent, and as such, policies aimed at the demand side of the market will not have any sustainable long-term benefits;
- Discouraging small scale investor-owned housing also means discouraging the creation of rental housing supply, which will drive up rents (current average rent for a one-bedroom condominium apartment, in Toronto, is $2080 per month, and $2,885 per month for a two-bedroom condo apartment); and
- Past experience with the provincial Speculation Tax in 1974 indicates that such a tax could have ripple effects that would negatively impact not just investor-owned homes, but also the value and equity of other home-owners.
The real solution to housing affordability issues is to ensure adequate supply of homes for sale and rent. From the perspective of the City of Toronto, the best option would be for City Council to accelerate implementation of its “Expanding Housing Options in Neighbourhoods” initiative, which aims to facilitate a greater diversity and number of housing units in existing neighbourhoods.
TRREB is encouraged that governments are taking this issue seriously, but we urge caution to make sure that policy actions are targeted at the actual causes and do not have unintended consequences.