First, let me begin by saying I agree with councillor Joe Cressy’s recent statement, “Housing should be used for just that: housing.” Therefore it follows that housing should not be only used for hoteling nor should it be solely used for investment. Clearly, the core issue is that housing for several years has become unaffordable for a multitude of Toronto residents. The causes of this phenomenon are complicated, but foreign investment, low interest rates, and short-term rentals are key factors. Consequently, I doubt that Toronto’s well-intentioned new vacant home tax will do much to address the problem of affordability. For more information please read: https://www.680news.com/2020/12/16/toronto-vacant-home-tax-vote-in-favour-city-council/
Canadian real estate law has so many loopholes that for all practical purposes foreign investment in real estate is allowed. Note that many countries do not allow foreign ownership of real estate properties, such as New Zealand. Other countries allow foreign ownership of condominium units, but not land, such as the Phillippines. Not surprisingly, in the Phillippines often it is more affordable for locals to buy land as opposed to a small condo, since in the condo market locals have to compete with foreign buyers. The problem that foreign investment in real estate creates is that it often leaves locals out of their own market. For more information please read: https://financialpost.com/personal-finance/mortgages-real-estate/foreigners-are-banned-from-buying-property-in-new-zealand-canada-should-do-the-same
However, banning foreign investment into real estate might not be enough. For instance, despite banning foreign ownership in real estate, New Zealand still has a housing affordability problem in part due to low-interest rates. Toronto is in a similar boat, because as long as we have low-interest rates it will be more attractive for investors to invest in housing as opposed to other markets. And it is far from certain that a vacant home tax will help when investors can borrow a million dollars for less than 2.5% interest in a market that substantially increases in value year after year. They will make more money flipping homes than renting them. While raising interest rates might discourage house flipping and increase the number of rental units, it likely would adversely affect homeowners already struggling to pay their mortgages. For more information please read: https://www.bloomberg.com/news/articles/2020-12-02/kiwi-housing-frenzy-exposes-perils-of-ultra-low-interest-rates
Short-term rentals such as Airbnb raise rental prices. Ontario’s temporary ban on short-term rentals during the pandemic resulted in record drops in rental prices. While it is a seemingly reasonable argument that we should be able to rent out our homes even for a short-term there is a stronger argument that we cannot run a hotelling business unless we are in fact a hotel. And the common good, in this case, lower rental prices takes precedence over hotelling businesses. For more information please read: https://www.blogto.com/city/2020/12/toronto-enforcing-new-rules-airbnbs/
Toronto has a housing crisis. There are people living in parks, streets, and tents. We have both the moral authority and an ethical responsibilty to take action. Collaboration from all levels of government is needed to tackle this complicated problem. There isn’t a magic bullet solution to this crisis. However, a good start would be a ban on short-term rentals, and an end to foreign investment into real estate. A permanent ban on short-term rentals can be done literally tomorrow. While all the loopholes that still allow foreign investment in Canadian real estate must be closed.