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Toronto to end commercial tax rebate, adopt rent control

Next week’s executive committee meeting is gearing up to discuss sweeping changes to housing in Toronto.

Mayor John Tory recently proposed phasing out the vacant commercial and industrial tax rebate program that gives businesses that are sitting empty a tax rebate. The tax rebate program, which has been in place since 2001 offers unoccupied commercial properties a 30 per cent tax rebate and industrial properties get 35 per cent. The program requires owners to try and rent the space, but does not provide a time limit on how long a business owner can receive the rebate. A city report revealed the program has given more than $367 million in subsidies to property owners, much-needed revenue that could be better spent elsewhere.

The proposal that will be discussed at next week’s meeting recommends the city lower the tax incentive to 15 per cent, beginning on July 1, 2017 to June 20, 2018, and then permanently shut down the rebate program on July 1, 2018. The report also recommended the rebate expenditures be reinvested in job growth programs and the poverty reduction strategy. This decision has been widely embraced by the city because poverty reduction is in dire need of funds in Toronto, and promoting businesses to stay empty is bad business after all. The rebate program has been criticized in the past because it allowed property owners to sit on their vacant stores while the value of the location increased. This has left several stores empty and little available business real estate in Toronto.

The executive committee also plans to focus on rental affordability in Toronto. Recently the province has put forward a bill on rental control, and has indicated that municipalities will be able to implement it at will. City council is moving forward with this initiative and will discuss how to implement rental control with a specific provision to have the rent control tied to the unit and not the tenant. There will also be an update on inclusionary zoning and laneway suites in Toronto.

The city is taking sweeping steps to respond to the high-pressure housing crisis in Toronto. By removing the tax rebate to empty businesses, it incentivizes business owners to fill their storefronts and reallocates much-needed funds to poverty reduction. Moving forward with rent control, inclusionary zoning and changing the regulations around laneway housing are all necessary to make Toronto a more liveable city. The outcome of the meeting will be interesting indeed, and will set up for a sure-to-be exciting May City Council.

Will Ontario’s new housing regulations do anything of value?

Ontario is cracking down on the red hot housing market by introducing a series of incentives that will, hopefully, control inflating real estate in the Golden Horseshoe region.

The province plans to bring in a series of 10 different initiatives to help placate the housing and rental markets — but the proposed regulations are a mixed bag. The non-resident speculation tax (NRST) is the primary regulation the Ontario Liberals hope to pass and the plan has immediately fallen under criticism. NRST would tax individuals that are not citizens or permanent residents of Canada 15 per cent when they purchase a home. The tax would apply to transfers of land, including “single family residences, detached homes and condos”. It would not apply to residential apartment buildings. This tax is similar to the foreign buyer’s tax in Vancouver, but differs because it would allow people to refund the tax if they obtained permanent residency within four years of living in the home.

NRST is one of the less impactful initiatives announced Thursday morning because it only applies to foreign buyers and doesn’t adequately represent most of the buying market in Toronto. Blaming foreign buyers for the problems of a mostly localized Canadian real estate market echoes the xenophobic tendencies seen lately in the United States, and won’t help the housing sector in a large or meaningful way. Why not instead implement a vacancy tax so that local homeowners, including foreign buyers, wouldn’t be allowed to keep their homes empty? This would directly respond to the desperate need for housing in the city.

Luckily, one of the other initiatives does leave room for municipalities throughout the province to enact a vacancy tax if they so wish. This puts the onus on each individual city to make the decision, which is either an avoidance tactic or a way to appease a heightening tension between Canada’s largest city and the province. The province will also crackdown on assignment clauses, which allows a buyer to pass on the right to another person to buy a property, and is a ‘scalping’ strategy to avoid taxes.

In the renting sector, the province will allow rent control again, which was banned in 1991. This will prohibit landlords from raising rent by more then 2.5 per cent, which has recently become a massive problem in the Golden Horseshoe. This is a positive change for renters who are currently at the whims of greedy landlords without rental control in place. The province also plans to strengthen the Residencies Tenancy Act to further protect renters from corrupt landlords.

The province of Ontario is finally taking action on the over-inflated housing market in the Golden Horseshoe, but it still stands to ask whether the initiatives introduced are too weak? By introducing a non-resident tax, the province avoids tackling the larger issue. With an election around the corner, the province may be hesitant to bring the hammer down on wealthy homeowners. Hopefully, the City of Toronto takes the initiative instead and enacts a vacancy tax on behalf of the province.

That being said, the incentive to crack down on speculation driving the market up and re-introducing rent control are fantastic incentives for the province. It remains to be seen what the new regulations will actually do for Ontario — but it will be clear what works and what doesn’t have an incredible impact on the red-hot housing sector.

Rent control needed to control rising prices

Rent is at an all-time high in Toronto, with low vacancy rates and high prices. In other words, it is nearly impossible to find a home to rent in the current market.

The cost of renting a home in the city has increased above the rate of inflation, and the municipal and provincial governments are looking at ways to help control the price of rent. The Ontario government announced in March  it will consider substantial changes to rent-control rules due to tenants complaining about double-digit rent increases that are leaving people homeless. As the rules stand, only apartment buildings built before 1991 can have rent control and the government is now looking at changing that.

Ontario introduced rent controls in 1976 as a temporary measure to lower rent increases to the rate of inflation, and the NDP government offered a five-year rent control exemption to units in 1992 to encourage developers to build new units. The rules then became permanent. Instead, landlords can only raise rent by 1.5 per cent annually, but can apply for additional increases. Many stakeholders, including CIBC Capital Markets, are against re-implementing rent control because it previously reduced new construction of apartment buildings, and accelerated building deterioration that had rent control.

Rent control is being criticized because there is a concern that landlords won’t upkeep apartment rentals if they can’t lift the cost of rent, or that tenants will remain for longer. It is assumed that landlords will do the bare minimum to maintain an apartment and many rent-cost units fall into disrepair. Avoiding rent control because it would cause landlords to not maintain their property truly demonstrates how corrupt the rental market is. There should be a morally upright desire to fix units. Instead, avoiding certain rent control strategies because it is naturally expected landlords won’t upkeep their responsibilities proves how greedy and deplorable the apartment rental market can be.

The City of Toronto has decided to implement a new set of rules that will force landlords to track tenant complaints, respond quickly to repair requests, and provide pest control. The rules will come into effect on July 1 and is being widely celebrated by tenants in Toronto. The program will be enforced 12 months after launching and will apply to 3,500 buildings with three or more storeys of 10 or more units, resulting in 350,000 apartments. The rules indicate that emergency requests such as no water or heat must be handled in under 24 hours and a pest control situation must be dealt with in 72 hours. Landlords will also be forbidden from renting an apartment with a pest control problem.

Re-implementing rent control is a necessary in Toronto, especially with the new rules that have been implemented that would force landlords to upkeep their rental units. The cost of renting an apartment should be at par with the rate of inflation, because otherwise it is giving way to corruption and greed. It is commendable that the province and city are getting involved in rentals and will ultimately force landlords into a position to provide tenants with fair prices and liveable apartment units.