Observers warn that a levy in Toronto similar to what the B.C. government implemented in Vancouver last year would be little more than a gesture
In its latest report, the Ryerson’s City Building Institute argued that the growing clamor for the imposition of a foreign home buyers’ tax in Toronto is sorely misguided, as such a measure will not be enough to address the city’s overheated rate of real estate price growth.
“It's not going to be sufficient,” according to Josh Gordon, author of the report and assistant professor at the Simon Fraser University School of Public Policy.
“They also need to have an annual property surtax that is offset by the income tax you pay,” Gordon added, as quoted by CBC News. “Those who own property based on foreign sources of income or wealth are hit by the surtax and everyone else is more or less spared. That discourages foreign ownership and that would bring prices down better than a foreign buyers’ tax.”
The academic explained that the Vancouver and Toronto real estate price spikes in the 2015-16 period coincided with a huge capital flight from China—a development which points to wealthy foreign buyers as a main contributor to Canadian home price growth.
“Low interest rates definitely play a role in high prices, but other cities didn't see nearly the price- to-income ratios increases as Toronto and Vancouver,” Gordon said.
Last week, the Ontario Real Estate Association stated that improving the supply of homes in Toronto by accelerating the rate of new construction is key to addressing the city’s long-running affordability situation.
“Over time there have been provincial and municipal policies that were well-intentioned at the start, but have combined to put a strangle-hold on the construction of new housing,” OREA CEO Tim Hudak said. “As a result, we have fewer new homes being built today than 20 years ago.”
Hudak added that the government should decisively intervene by removing the bureaucratic roadblocks that currently surround new home construction, as this would be the best way to improve supply in the high-demand, high-volume Toronto housing market.
“You can have housing prices be bid up so the next generation can’t afford a home, or you can increase housing supply to give more choices in the marketplace,” the OREA chief explained.
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