High -profile Toronto developer Brad Lamb is warning a foreign home buyers tax could cause a Canada-wide recession, but a professor advocating for the tax says Lamb is just "fear mongering" to save his bottom line.
Lamb's campaign against the tax began earlier this week in a 1,300-word Facebook post.
He warned the 15 per cent foreign buyers tax instituted in Vancouver in Aug. 2016 will turn out to be ineffectual, and one in Toronto would be ruinous.
"It could also precipitate a Canada-wide recession," he wrote.
He's the first developer to wade into the controversial debate in Ontario and he said he brings a wealth of experience with 30 years experience and 15 buildings currently in various stages of development.
In an interview with CBC Toronto, he referred to it as an "investor tax" and said foreign buyers allow many of Toronto's condo buildings to be built.
"We want to be very careful on this. If we enact a 15 per cent investor tax they're gone. They're not buying here," he said.
It's a "ricochet" problem for Toronto where the spin-off would also stall local buyers, albeit only for a short while, he said.
"Everyone sits on their hands and they don't buy," he said, which would reduce construction spending and lead to layoffs. "It's a self fulfilling prophecy. People wait a year and then say, 'Look, prices have dropped 3 per cent.'"
Desperate attempt to prevent tax
Josh Gordon, an assistant professor at Simon Fraser University in British Columbia, accuses Lamb of trying to confuse the issue to suit his own agenda.
"I think that's just fear mongering," Gordon said.
In a 2016 survey by the Toronto Real Estate Board, real estate agents pegged the share of foreign investors in Toronto at 4.9 per cent.
Lamb said the share of foreign investors is "significantly higher," but wouldn't give an exact percentage.
"What is going on here is a desperate attempt to fight off a foreign buyers tax because they want the party to continue," Gordon said. "We're seeing two different arguments; one is that [foreign investors are] marginal and now we're seeing a different argument that it's crucial and essentially if you touch it everything is going to go to crap."
In a report published by Ryerson University, Gordon said a foreign buyers tax should be introduced in conjunction with a new property surtax targeting foreign nationals.
Gordon said foreign demand pressures are paramount in Toronto's market, and the often argued crisis of housing supply wouldn't account for the city's rapid 20-30 per cent home price growth over the last two years.
"There is no major change at the municipal level that would explain this kind of a surge in pressure," he said. "There's just no way supply constraints can get you to the kind of prices Toronto has seen."
Lamb accuses city of stalling development
But Lamb argues the city slows new development.
"A project that I bring to the city of Toronto now takes me seven years to complete. It should take me four. Why does it take seven? Well, it's not me ... We're being stalled at the city level," he said.
Lamb points to one of his projects at Richmond Street West and Spadina Avenue as an example. It's been delayed by two-and-a-half years, he says, because of issues at city hall.
Lamb argued the better fix for Toronto's housing market is to put more people on the Ontario Municipal Board to speed up the adjudication of disputes between developers and the city.
City officials disagree with Lamb, saying development isn't being stifled.
Toronto has more than a 3 year supply of units that could commence construction in the next 1 to 3 years, *already approved.* #MythBusting— @jen_keesmaat
Spokesperson Bruce Hawkins said between 2011 and 2015, the city approved 20 per cent more units than have been started.
Foreign investor taxes have been introduced in Hong Kong (30 per cent), Singapore (15 per cent) and Melbourne (3 per cent), according to a report by TD Bank.
The bank's chief economist Beata Caranci said in those markets it's been an effective tool to cool a housing market but not stop it.
"Typically what we've seen on international stages is you get some cooling off in sales and prices, which is in fact what we're seeing in Vancouver. But you don't get any sort of landslide in prices," she said. "In fact over time you see demand flow back in, meaning foreign investors come back into the market."
Lamb said it's not fair to compare Toronto's market to international markets where prices per square foot are substantially higher.
"Our prices are so affordable on a world scale," he said. "Basically what we're doing is we're targeting a scapegoat because it's convenient politically," he said.