Foreign nationals who don’t live in Toronto and its surrounding communities will pay an additional 15% tax on homes under legislation proposed by the Ontario government.
Ontario Premier Kathleen Wynne made the announcement Thursday in an effort to cool a hot housing market in Canada’s largest city.
It matches the 15% tax the Pacific coast city of Vancouver has implemented. Wynne said the tax is not about targeting immigrants.
“We’re targeting those are who aren’t looking to raise a family. They are only looking for a quick profit or a safe place to park their money,” Wynne said.
The average price of detached houses in the Greater Toronto Area rose to $1.21 million Canadian (US$900,000) last month. Wynne said when the market jumps 33 per cent in a year they know there’s a problem.
“There is a need for interventions right now in order to calm what’s going on,” Wynne said.
The tax will be imposed on buyers in what’s known as the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations. Once the legislation passes, the foreign tax would be effective retroactively to April 21.
“Other provinces will be watching closely to see if Ontario’s new regulations drive foreign capital into their residential property markets, with Montréal having already sparked overseas interest,” National Bank economists said in a research note.
Wynne introduced other measures as well. Ontario is also expending rent control, which currently only applies to units built before November 1991. Tenants in newer units have complained of dramatic spikes in rent.
The premier said they are taking aim at speculators and are tackling affordability.
The government doesn’t keep statistics on the number of foreign buyers. There has been talk Asian investment in Toronto picked after Vancouver introduced its foreign buyer tax last summer.
Ontario’s proposed measures
- A 15% non-resident speculation tax to be imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations.
- Expanded rent control that will apply to all private rental units in Ontario, including those built after 1991, which are currently excluded.
- Updates to the Residential Tenancies Act to include a standard lease agreement, tighter provisions for “landlord’s own use” evictions, and technical changes to the Landlord-Tenant Board meant to make the process fairer, as well as other changes.
- A program to leverage the value of surplus provincial land assets across the province to develop a mix of market-price housing and affordable housing.
- Legislation that would allow Toronto and possibly other municipalities to introduce a vacant homes property tax in an effort to encourage property owners to sell unoccupied units or rent them out.
- A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties.
- A five-year, $125-million program aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges.
- More flexibility for municipalities when it comes to using property tax tools to encourage development.
- The creation of a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions.
- An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market.
- A review of the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions.
- The launch of a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures and any additional steps that are needed.
- Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.
- A partnership with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.
- Set timelines for elevator repairs to be established in consultation with the sector and the Technical Standards & Safety Authority.
- Provisions that would require municipalities to consider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes, among other things.