As everyone’s attention is shifting to the upcoming June 7 provincial election, the Toronto Real Estate Board (TREB) has called on all three major parties to outline their housing policies in a debate format.
It seems like just yesterday that the 16-point Fair Housing Plan was announced. Some of the points just kicked in at the beginning of this year.
“Greater Toronto Area REALTORS® have been involved in recent discussions on provincial housing policy which impact the GGH, including the tax on foreign buyers, rent control and increases to the provincial and municipal land transfer taxes, among others,” says TREB President Tim Syrianos.
One of the major changes that came into effect on January 1, 2018 was the stress test for uninsured mortgages. Homebuyers are now required to undergo a stress test to qualify for a mortgage even if they have a 20% down payment.
The stress test is supposed to determine if the buyer can afford the mortgage should interest rates increase, which they are expected to do. It actually is effective because all buyers qualify for less now. If everyone’s borrowing less, then everyone owes less.
But, this also means that fewer people are buying homes. According to TREB, there were only 5,175 home sales in the Greater Toronto Area (GTA) in February 2018, which is nearly 35% lower than the record high sales the previous year.
The Canadian Real Estate Association (CREA) recently released its national resale report for February 2018 and noted that the dip in sales in Ontario and the GTA in particular played a major factor in the overall decline of real estate activity in the country.
Both TREB and the CREA expect the psychological effects of the Fair Housing Plan to wear off in the second half of 2018. There will likely be a rebound in prices and home sales by late summer or early fall.
“Recent issues in the housing policy debate should come to the fore as we move toward the June election,” Syrianos adds. “Recent research and past experiences have shown that demand-focused measures do not lead to long term affordability in the housing market.”
If policies like these aren’t the answer (and we’re not saying they’re not), what else can the province be doing to create a healthier and more accessible housing situation for everyone?
President of New Home Buyers Network, Sam Reiss, suggested getting more creative with new housing and look at other areas in the world where they are experimenting with innovative communities.
“Self-build communities in Chile, Holland and Britain have all been successful,” Reiss says in a recent blog post. “In Iquique, Chile, the Quinta Monroy community took a government budget of $7,500 per home and offered the squatters for which they were intended ‘half a good house,’ which would meet their basic needs, and which they were encouraged to supplement themselves over time.”
TREB CEO John DiMichele has a few suggestions, too: “What would go a long way in achieving sustained market balance would be policies pointed at a diversity of ownership and rental supply in the marketplace. This could include re-examining current policies constraining supply and additional policies that could help bridge the gap between traditional low-rise types and high-rise condo apartments, often referred to as the missing middle.”
“Consumers also need relief from high taxation such as provincial and municipal land transfer taxes which is affecting affordability and discouraging mobility,” he adds.
We really hope this housing debate happens!