Finance ministers meet with Toronto mayor to discuss housing affordability crisis
House prices up 33% in city, but hot markets overflowing into suburbs too
Finance Minister Bill Morneau will meet with his Ontario provincial counterpart Charles Sousa and Toronto Mayor John Tory on Tuesday to discuss a housing affordability crisis that realtors say is caused by lack of supply and pushing would-be homeowners farther and farther away from downtown in their zeal to buy.
The three men will meet in Toronto on Tuesday to discuss the area's red hot housing market, where prices have shot up by more than a third in the past year, and there's havoc on the rental side of the ledger, too.
Governments have moved repeatedly in recent years to try to cool down speculation, from shortening amortization periods to increasing minimum down payment requirements.
- Ottawa tightens mortgage rules on homes over $500K
- New mortgage 'stess test' rules kick in starting October 2016
But in Canada's biggest city at least, prices continue to push higher. Realtors say a lack of supply is a big part of the problem, as poor zoning decisions and a dearth of purpose-built apartment buildings have compelled people to buy detached homes at virtually any cost.
"With high household formation levels driven by expanding employment opportunities, we are playing catch-up with the supply of housing," Royal LePage president Phil Soper said in a new report released today. "In a low interest rate environment, many of these people will want to purchase a home, which is going to put further upward pressure on home prices."
Toronto may be the epicentre of the problem that policy-makers will meet to discuss on Tuesday, but affordability issues have packed up and moved to the suburbs, too.
According to Royal LePage, the average price for all types of housing across the entire GTA grew by an "unprecedented" 20 per cent in the first quarter of this year compared to last, and suburban markets such as Richmond Hill, Oshawa, Vaughan, Markham and Oakville are even higher. And the bubble extends as far as London and Windsor, which aren't suburbs of Toronto by any reasonable definition.
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Gains like that are unlikely to continue, experts say, and that makes the area's housing market more vulnerable to a correction if there's even a slight change to the current ultra-low interest rate environment.
"We're building a problem," CIBC economist Avery Shenfeld said in an interview with CBC News. "But it's a problem that will really be more serious some years down the road."
Shenfeld's among those who thinks poor planning with regards to zoning and bylaws is partly to blame, as those who write the development rules aren't moving in lockstep with what people want to buy.
"If we want a cure for high house prices that actually helps the economy, it's build more housing units," he said, suggesting that Tuesday's meeting leads to a "whole fresh look at zoning — where we build [and] what we build," he said.
Changing zoning laws are one of the more long-term and least dramatic options on the table for the ministers and the mayor, but other options include a foreign buyer tax such as the one implemented in Vancouver, a new tax on house flippers or vacant homes, and even changing the capital gains rate that governs how proceeds of home sales are taxed.
Whatever the cause — or preferred solution — Tuesday's meeting is a sign that policy-makers know something has to be done before the impact spreads even farther afield.
Toronto area realtor Josie Stern says she'd prefer to see a crackdown on speculators specifically, citing one buyer who bought 15 properties in the last two years.
Affordability is such a problem in the city, she says, that about a third of her clients are either people downsizing or people locking in gains by moving out of the hot Toronto market and into more affordable parts of the province.
"We're finding that a lot of people are leaving the city," she said. "It's empty-nesters, it's [couples with] babies, it's all kinds of people that are doing this."
With files from The Canadian Press