Crackdown on empty homes
According to the government of Ontario, vacant homes left vacant by speculators are impacting affordability. The city has suggested a tax on these homes as one solution by encouraging owners to sell unoccupied homes – which would add inventory to the market.
“For this reason, the government is proposing amendments to legislation that would grant Toronto broad authority to levy an additional property tax on vacant homes,” the budget reads. “Under this approach, the City would be responsible for the detailed design, implementation and administration of the tax.”
A development push
The province will incentivize developers to add supply to the market.
“The government will also work with municipalities to ensure they have the tools they need to help encourage the supply of new housing,” the budget says. “This could include providing municipalities with the flexibility to use property tax tools to assist with unlocking development opportunities, such as imposing a higher tax on vacant land which has been approved and serviced for new housing.”
Addressing pre-sale agreements
“‘Paper flipping’ refers to the practice of entering into a contractual agreement to buy a residential unit and assigning it to another person prior to closing,” the budget says. “It can also refer to arrangements in which one party substitutes another party in a contract to buy a residential unit. This practice may be contributing to tax avoidance and excessive speculation in the housing market.”
The government will now require information about assignments of agreements through the Land Transfer Tax system. Purchasers will be required to declare whether they purchased by way of assignment; this information will then be used to determine proper tax payments.
“Ontario also intends to work with the federal government to explore more comprehensive reporting requirements related to paper flipping,” the budget reads. “This would better enable the Ministry of Finance and the Canada Revenue Agency to ensure that the correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.”
Protection for buyers of new builds
The province has suggested the following measures to better help protect purchasers of pre-build units.
Brokerage: New Ontario housing plan a negative for investors
- Make the dispute resolution process easier for homeowners if they discover a problem in the construction of their new home;
- Separate the provider of the new home warranty program from the new home builders regulator to increase consumer confidence; and
- Give the government responsibility in making rules, setting standards and introducing modern oversight measures to improve accountability and transparency.
Mortgage rule change effects extend to small market
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The province released its annual budget last week; this is what investors need to know.