I've written several blogs on this topic before, often while hinting that the answer to the rhetorical question, is "nothing."
Only now, it seems as though the government is jet-set on dumping a bucket of ice on the city of Toronto.
I mentioned the Globe & Mail article from last Wednesday, which set out a slew of potential ways to cool the market.
Today, I want to look at those one at a time, and see if we can come up with anything else on our own…
What a cute photo!
There's nothing quite as misleading as making your heart melt, just before we break it…
Great debate on Monday, folks.
Friends, family, colleagues, random blog readers – they all tell me, from time to time, that while they enjoy my blogs, they love reading the comments as well.
I rarely, if ever, monitor comments. It's a testament to the readership I've blessed with on TRB.
And with every post, you folks add value with your knowledge and insights, unlike 99% of all comments, found on the Internet.
For that, I thank you. Again, and again.
I value your insights and opinions, and as the content of TRB has become far more political and "big-picture" in 2017, I enjoy seeing what people think.
That's why today, I wanted to see what somebody else has come up with in terms of "ideas" on how to cool the Toronto housing market.
You've heard from me on this subject over and over.
It's time to look at somebody else's ideas, and then, as is the custom on TRB, analyze and discuss.
Last Wednesday, Globe & Mail columnist Janet McFarland took her turn trying to come up with ways to cool the market.
Here's her article: "What can governments do to cool Toronto's housing market?"
I give her credit for coming up with thirteen ideas.
But having said that, I want to analyze each one, because some of these have been bandied about before, and give you my two cents, before I get yours.
The thirteen ideas were proposed at the federal, provincial, and municipal level.
Here are the thirteen ideas, with my thoughts below:
This has absolutely no meaning to me.
It sounds like a combination of rhetoric and gibberish. It's just words. And it sounds like it was coming from the mouth of a politician.
Have you ever heard a politician side-step a question?
"We're currently examining and exploring particular avenues, vis-a-vis different levels of government, in anticipation of gaining momentum in the dialogues that result from various endeavours to find common ground."
Crap like that.
When I hear "housing strategy," it reeks of a government official, standing in front of a podium, issuing a memorandum, and ultimately doing absolutely nothing about it.
And what can the government, at the federal level, co-oridinating with the provinces and cities, do about high real estate prices, and supply and demand?
I'm thinking they're not going to magically cut income taxes in half, so people have more money to buy!
Perhaps there are some other ideas…
2) Raise the portion of profits subject to capital gains tax on sales of non-principal residences to deter speculation and flipping.
I'm not in favour of raising taxes.
Especially when it's on a profit, that a hard-working, tax-paying citizen made, by sticking his or her neck out and making an investment.
Disagree with that if you want, and I won't blame you.
But consider that when somebody "flips" a house, they hire and employ dozens of people, for months at a time.
Architects, engineers, plumbers, interior designers, electricians, drywallers, painters, masonrists, brick-layers, landscapers, day-labourers – and the list goes on.
To "deter" flipping, means fewer houses are renovated.
This means fewer people are employed.
It also costs the City of Toronto land transfer tax, GST, and the existing capital gains.
You can't solve one problem in this equation, without creating another…
3) Increase the first-time home-buyer RRSP deduction above the $25,000 limit, allowing people to withdraw more to fund the down payment on their first home. Also allow "inter-generational RRSP transfers" under the plan, giving parents an efficient way to help with down payments.
I couldn't possibly agree with this more.
Allow the amount to withdraw from one's RRSP to be unlimited.
Argue that this only encourages people to take on more debt.
Argue that this puts more money into the market, which creates more buying, and further skews the existing supply-and-demand equation.
But we have to start somewhere, right?
4) Remove the GST paid on municipal development taxes – a tax on a tax, according to the Canadian Home Builders' Association – to make buying more affordable.
I'm not convinced this would help buyers.
I don't believe that if the government allowed the developers to pay less tax, that developers would charge less to the buyer.
I think developers would just say "thank you" and take the money and run.
Don't get me wrong – a federal tax on a municipal tax is laughable! It's insanity!
But it's hardly the most insane tax we have in this country, province, or city.
5) Impose a speculation tax on people who flip houses within a short period, perhaps within two or four years of purchase. The tax could apply to all homes or be limited to non-principal residences.
Would this be instead of the increase in capital gains tax, or in tandem with it?
You can't have both.
Although I don't think that would stop Mr. Trudeau and Ms. Wynne from incorporating both, and claiming each had no idea what the other was doing.
The idea of a straight tax on the time period in which a house is owned is ludicrous.
God forbid, somebody gets a new job, loses a job, moves, doesn't like the area, or has a valid reason for wanting to move!
Can't you see this playing out during an audit?
A crying couple, sitting with a pencil-pusher at C.R.A., saying, "We both lost our jobs, somebody stole our car, our dog turned into a cat – we just needed a fresh start in a new area!"
Sure, the C.R.A. could make exceptions. But would they? And what would the exceptions be? When would they apply? At whose discretion?
Let's say the speculation tax only applies to non principal-residences, then we're right back to the increased capital gains tax again.
I still fail to see how more taxes equals less buyers and more sellers.
6) Introduce a tax on foreign buyers who buy residential homes in the GTA, similar to the 15-per-cent tax imposed last year in British Columbia.
If you're going to do one thing, then do this.
This way, 0.00% tax-paying, Canadian residents would be affected.
This would take out of the market those who "don't deserve" to be in it, and leave the rest of us alone.
When compared to ideas #2 and #5, this is a no-brainer.
Don't increase taxes on Canadian residents who already pay taxes. Tax the people who don't live here, but buy and hold our real estate.
7) Develop a progressive property tax for foreign owners, requiring people who own homes but do not live or work in Canada to pay an annual property tax surcharge.
This would be a great idea if you felt #6 went too far.
This allows foreign ownership, doesn't penalize sellers by taking buyers out of the market with the punitive tax, and yet still increases tax revenue for the municipality.
This won't help "cool the market" very much, but it'll increase taxes for the municipalities.
8) Prohibit foreigners from buying resale homes, except under limited circumstances, to curb speculation, but allow them to buy newly built homes to encourage investment in new housing stock.
Great idea! That is, if you love idea #6, but don't want to simply give another tax over to the government.
Restrictions on foreign ownership exist in many countries, but when the topic comes up, people always point to Australia.
-foreign buyers are limited to new homes and condos
-there is a $5,000 fee for foreign buyers to make an offer
-foreign buyers who purchase vacant residential land are required to build on the land within 24 months
-the government can force the sale of homes purchased illegitimately or illegally
-foreign buyers must register their purchase with the Foreign Investment Review Board
If you ask me, this is the best idea of the lot.
It requires more government oversight, and they've demonstrated that they've clearly dropped the ball over the past two decades, since they have no clue who, from where, owns what.
But if the Canadian government could pull this off, it would be worth considering.
9) Expand rent control rules to cover more homes, helping to moderate rent increases for people who cannot buy.
This is ridiculous.
Rent controls would not help the market.
In fact, I think if people renting new condos could stay in those condos forever, with a modest 1.5% increase in the rent each year, then no rented-units would ever come up for sale on the open market.
This would actually lower inventory levels, and have an adverse effect on the market.
10) Give municipalities a break from high-density development requirements to improve the supply of detached, single-family homes, while also encouraging more innovative housing solutions. Target infrastructure like transit to places where it is most needed to help get land developed.
This makes absolutely no sense.
Maybe in Keswick, or Kenora.
But in Toronto?
Should we force developers to build four detached houses, instead of a 60-storey tower with 300 units?
This point can't be about Toronto…
Toronto and other municipalities
11) Impose a vacancy tax on homes left unoccupied by the owners, which would be collected by municipalities but would require provincial approval to implement. Vancouver is introducing a vacancy tax this year, set at 1 per cent of the assessed value of the home. It relies on the homeowner to declare whether a house is occupied or not.
Notice a theme here?
Personally, I see no issue with buying a property, and keeping it vacant.
If you can afford to buy a property and keep it vacant, losing the potential rent each month, then you've done well for yourself, and I don't believe in punishing people for being successful.
If you want to target foreign buyers, then target foreign buyers.
Don't use this end-around about "vacant properties."
Because personally, I think if a domestic buyer wants to purchase a property, and keep it vacant, then he or she should be able to – so long as they pay the land transfer tax on the purchase, the potential HST on the new-build, the capital gains tax on the sale, and the property tax, each and every year. Isn't THAT enough tax?
12) Reduce development charges to make new homes more affordable. Development charges are paid by a builder to the local municipality to fund infrastructure costs like roads and transit, and builders pass along the costs to new home buyers.
Development charges are NOT paid by developers.
Well, I mean, they're paid by the developer. But it's not the developer who actually comes up with the money.
Read your 200-page pre-construction condo agreement.
The developer is simply charging this back to the buyer.
So if you reduced these fees, maybe the developers reduce their prices.
But the government has to make that money up somewhere else.
If the City of Toronto is making, say for example, $300 Million per year in development charges, they have to replace that money somehow. And it's not by stopping Rob Ford's gravy train. If that tax vanished, a new one would take its place.
13) Fast-track zoning approvals for residential development and streamline other approval times for all stages of projects to help get more housing units constructed.
Fast-track? Sounds great.
But does this mean developers can do more, faster, with less oversight and regulation?
Because that's the last thing we need.
They already get away with enough. People are blindly buying pre-construction condos again. Only the "VIP" or "Platinum" real estate agents, who have sold their souls to developers, are allowed to represent buyers. As a result, the buyers have no representation. But that's another story. For every 300 unit condo being built, there are 600 "worksheets" submitted from buyers, who will lay down and let the developer run them over with their car. But that's another story too.
I don't know that "fast-tracking" and "development" should go in the same sentence in downtown Toronto.
Well that's all I've got, folks.
I welcome your thoughts on both the "thirteen points," as well as my comments.
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