How will Ontario’s Fair Housing Plan affect the GTA?

April 2017

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The Ontario Fair Housing Plan was released last week by Premier Kathleen Wynne and Finance Minister Charles Sousa to much fanfare and discussion. Our analysis of the measures has so far included a Tax Alert and a look at some of the implications of the measures on the national real estate and construction market.

However, while its implications will certainly be broad reaching in scope, the Government stated that one of the primary objectives of the Plan is to cool the red-hot real estate market in the Greater Toronto Area (GTA) and Greater Golden Horseshoe (GGH). 

BDO’s Jameson Bouffard, GTA Real Estate and Construction Leader, and George Dube, Central Real Estate and Construction Leader, provided their thoughts on what they feel the expected impacts might be on key stakeholders and trends in this targeted region:

  • Supply: Before the announcement, Toronto was already facing a significant issue with supply (as evidenced by its ~1% vacancy rate) and there are simply not enough units available to buy or to rent. In fact, it is estimated that between 30,000 and 50,000 new units per year are needed to sustain demand at current levels, and bidding wars featuring 10-20 applicants are already commonplace. A major concern is that rent control measures will stall apartment building development as investors find other areas of real estate to invest in that may have less risk.  
  • Foreign Investors: Obviously, a tax on non-residents is likely to discourage them somewhat from putting their money into the region. However, what’s unclear is how this will affect the market where a combination of domestic and foreign interests are pooling together for investments (especially if the non-residents hold a minority share). It is expected that this will lead to changes in how foreigners invest, where they invest, the creation of more complex entities and/or increased pooling for larger units (which are not impacted the same way by the restrictions), as examples.
  • Landlords: Those already operating on razor-thin margins may decide to divest their holdings (and likely to buyers intending to live in, rather than rent the units) and not bother with being handcuffed against rising operating costs. There’s also the risk that many may begin to only do the bare minimum with regards to repairs and maintenance. So while rents will be controlled, there will be some negatives that we expect to be felt in the market.  
  • Housing Prices: It is still much too early to predict what the impact will be as the GTA still has an extremely limited supply of residential real estate, land that is not subject to greenbelt rules, and a healthy demand for housing. Prices are impacted by many factors, and if the majority of foreign investors – which already only comprise less than 10% of the market in the GTA – become more focused on larger projects it is challenging to see a permanent decrease in housing prices from these measures alone from a long-term perspective without meaningful changes to supply or an increase in interest rates, for example. Vancouver’s implementation last year of the non-resident tax certainly showed a decrease in activity initially, however – while it is still too early to judge – it appears the market is recovering and is on track to hold stable. 
  • Long-Term Opportunities: Ultimately with a shortage of supply, opportunities will arise particularly for those who can weather the current storm and adjust their investment structures and strategies as needed.

If you have questions about how the Plan might impact you, or you’d like information about how to best proceed amidst these restrictions, we recommend that you contact one of our BDO experts or your local BDO advisor.