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Ontario’s Plan to Tax Foreign Buyers and Expand Rent Control: What You Need to Know

15% Foreign purchaser’s tax in the GTA that started as of April 21st

This is a good start, but in my opinion won’t really do much to help the housing market.

Foreign buyers are already getting a 30% discount on the Canadian dollar, how is a 15% tax going to make much of a difference?

Google up the most expensive cities in the world to buy a house and Toronto comes up as #20. Toronto is a bargain compared to the other options that foreign purchasers have.

The foreign purchasers tax may have appeared to help slow down the Vancouver market but I believe it just moved the foreign purchasers away from Vancouver to Toronto. All this new tax will do is start the foreign buyers up in Vancouver again.

I believe that one thing that will really help is a “Vacancy Tax”.

Reportedly, there are almost 100,000 vacant homes in Toronto (Keep in mind these come from owners how report their homes as being vacant. There will be many more that are not being reported.)

It will be interesting to see if the government will implement a new “Vacancy Tax” this Wednesday.


Rent controls on all buildings

This is another big, big mistake by the Wynne government.

Rent controls will do 2 things:

  1. Stop the building and development of new rental units.

For example, Toronto developer Brad Lamb said the province didn’t do anything to boost supply in the province and vowed to cancel the rental projects that were already in his pipeline.

“Everything is stopping on the dime. I had nine apartment buildings in my pipeline,” said Lamb, describing projects in Toronto’s central core, its suburbs and Hamilton. I can tell you as of this announcement I will not do any of them.”

  1. Deteriorate the conditions of all existing rental units

“When prices are capped, people have less incentive to fix up and rent out their basement flat, or to build rental property. Slower supply growth exacerbates the price crunch. And those landlords who do rent out their properties might not bother to maintain them”

The government tried this before, it didn’t work.

Rent controls stop developers from building new rental units thus restricting supply of rental units in the market.

This ultimately hurts the very people that need to be helped.

The right answer is to give developers and builders more incentives to build more rental units, not less rental units.

In my humble opinion, what we should be doing is to charge a Vacancy tax on empty homes and use those proceeds to give developers incentives to build more rental housing. But maybe that’s just me.