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Instead of blaming foreign demand for prices that are rising because of government-imposed supply restrictions, the government should address how their own ideologically driven policies are contributing to the affordability crisis.

Foreign Buyers Tax Won't Solve GTA Housing Affordability Crisis


By -- Christine Van Geyn, CTF Ontario Director——--March 24, 2017

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This article was previously published in the Huffington Post The middle class dream is slipping through the fingers of families in the Greater Toronto Area (GTA), and the fault lies with our politicians. Forget about a car in every garage and a chicken in every pot--with parking spots in downtown condos selling for between $45,000 and $60,000 per space, who can afford a garage, let alone a house attached to it. In February, detached homes in the GTA sold for an average price of $1.21 million and Toronto home prices are expected to grow by 20 to 25 per cent this year. Compare that to average Ontario weekly earnings of $963, or $50,000 per year, and you can see the problem.
Ontario politicians depend on middle class GTA voters for their electoral success, and should be committed to seriously addressing the issue of housing affordability. Cue renewed pontification by the Ontario minister of finance about bringing in a foreign home buyers tax. Last year the minister said the government had no plans to tax foreign buyers, but he now saying he is considering a number of policy options to cool the GTA market, and that "a foreign tax is just one." The trouble is that many experts point out that the price issue has been overwhelmingly driven by a shortage of supply rather than a sudden increase in demand (let alone foreign demand). And supply restrictions are largely the fault of our political leaders. A report by CIBC took aim at the 2006 Places to Grow Act as instrumental in restricting housing supply. The act introduced policies to increase intensification and density in new housing development. The Act required rezoning along transit corridors, and mandated that by 2015 that 40 per cent of all new developments be within existing urban boundaries. This requires the building of townhouses, stacked homes and apartments over in-demand detached homes. The Act also requires new developments have a density of 50 residents or jobs per hectare. While CIBC found that neither of these targets have been met, the government mused about increasing them. This would lead to an even further restriction of land supply as municipalities would struggle to make up the difference.

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On top of actual physical restrictions on land, government bureaucracy restricts the available supply of land. It takes much longer to make new homes available for sale, and compliance costs are rising. The Fraser Institute estimates that typical approval timelines for residential development (that do not require rezoning) in the GTA range from 14.4 months in Burlington to 24.3 months in Georgina, with Toronto at 17.7 months. And the Ontario Home Builders' Association found that when total government costs are all factored into the price of a new home, they add up to over $100,000 in Toronto, $82,000 in Simcoe County, and $92,000 in Durham Region. It's like paying a second down payment directly to the government. And of course this doesn't factor in the land transfer tax, which is $48,400 on an average detached home in Toronto. These were all political choices. So when politicians like Minister Sousa opine about housing affordability, they need to look in the mirror. But instead of recognizing problems that were brought about through their own ideological vision of a province where every city looks like the core of downtown Toronto, they take aim at foreigners. A tax is never more popular than when it's on someone else--especially someone who can't vote.

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The problem is a foreign buyers tax will do nothing to solve the housing affordability problem in the GTA. Foreign buyers make up too small a portion of sales to make a difference--less than 5 per cent, according to the Toronto private real estate board. Even proponents who advocate for a foreign buyers tax concede that a foreign tax won't be enough to stop rising prices. This seems to be the governing philosophy of the Ontario premier and her cabinet. Create a crisis through failed policy, face public unrest, then bring in a band-aid solution that won't address the underlying (and government-caused) issues. It's what happened with electricity, and now it's happening with housing. Instead of blaming foreign demand for prices that are rising because of government-imposed supply restrictions, the government should address how their own ideologically driven policies are contributing to the affordability crisis.


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Canadian Taxpayers Federation -- Christine Van Geyn, CTF Ontario Director -- Bio and Archives

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