Toronto Canada becomes Anti-Property Rights: Instead of insisting CMHC and The Federal Government Get out of The Housing Market Toronto brings in a vacant house and condo tax – December 14, 2022,
So In B.C., this vacancy tax law already exists and hasn’t done anything to add to supply primarily because of EXISTING regulations on being a landlord. In almost every Canadian province, there exists rental controls and other price control mechanisms to make being a renter more “affordable.” Yes, these regulations on purpose rental housing are a complete scam that politicians use to buy votes. Still, the average Canadian voter, especially those living in major cities, are complete idiots who will vote for any politician who promises them unearned benefits.
What I’m getting at here is that political headlines garner votes, and politicians want to make it seem like they’re “doing something” to stop consumer price inflation. The problem with Toronto creating this law is that any common sense real estate investor will first try to find any way to avoid the tax, which includes LYING or bombarding the courts with appeals, but if all that fails, it will still be cheaper to pay the fine rather then rent out the property.
Why paying the fine/tax is more beneficial than renting the property?
And why this won’t lead to more rental-purpose housing on the market
Let’s say the Castro brother, that is currently in charge of Cuba, opens up the Cuban market and CANCELS all of his anti-capitalism regulations. Do you think people burned by the Castro government in the past are going to rush to invest in Cuba? Sure there will be investors, but they’re going to be extra careful investing in Cuba because, after all, Cuba has a history of NATIONALIZING private property.
One of the reasons for purpose rental housing is not being built in cities like Toronto is that the voters of Toronto have a history of voting for radical far-left politicians, who, like current Toronto mayor John Tory, whenever they feel like it’s politically expedient will REDEFINE property rights. If you bought a Toronto home in 2020, the property rights rules just changed.
Is that fair? Can I get a refund? Can I be compensated? Ofcourse not; the rules have changed; shut up, you rich bastard, and help the Toronto government solve a problem it helped to create. I should point out that Toronto had a housing problem way back in the 1990s, and I bring up the 1990s for a specific reason because, in the 1990s, the Canada Mortgage and Housing Corporation (CMHC) hadn’t arrived in the mortgage insurance business yet.
One of the main reasons housing PRICES are so high is that the CMHC helps Canadians pay fewer dollars down on their MORTGAGES. In the past, you, and in most countries, you have to put AT LEAST 20% down to qualify for a mortgage. In Canada, you can sometimes put 0% down; in fact, I think CMHC and possibly other branches of the Federal government have down payment loans available.
These 0%-5 % down payments have allowed more people to qualify for mortgages; now, although people want to blame foreigners for propping up our housing market, the truth is that a lot of these foreigners are taking advantage of the LOCAL connections they have in Canada. CMHC has created a dynamic in which Condos exist where rental purpose housing and commercial real estate should be.
I’ve met quite a few people who own commercial real estate and are waiting to be bought out by a Condo developer. Condos all over Canada sell like hotcakes now; back in the 1990s, condos were a tough sell; why? Because the FEDERAL GOVERNMENT wasn’t involved in the housing market. In my opinion, the people of Toronto have the right to remain stupid; if the people of Toronto want rent controls, they should be allowed to vote for them.
But when the Federal government sticks its nose where it doesn’t belong, that’s when you have condos(federal government) competing with rental purpose housing(municipal government), and the condos are going to win that battle every single time. Long story short, I don’t even know if this new tax is going to make much of a difference.
The real problem facing Toronto is Prime minister Justin Trudeau’s war on fossil fuels, which is fueling consumer price inflation. One of the major problems with rampant consumer price inflation is WAGE EARNERS. A lot of wage earners are demanding pay raises, and price controls don’t allow the minimum wage as an example to ever be reversed, meaning that the only question moving forward is how much more consumer price inflation we are going to experience.
Even if a new revolutionary clean energy source comes online, how long will it take for modern price controls to be phased out? Most people don’t even know the main driver of consumer price inflation are price controls, rent controls are price controls and being a landlord is risky in many ways because if the cost of labor goes up, I can’t raise rents to compensate for the higher cost of doing business, instead of renting out my condo, it would probably be smarter to pay the tax.
Now, one of the reasons the government doesn’t like to build housing is because of the MAINTENANCE costs associated with it. Most public sector workers in Canada are unionized, and their pay is reliant on taxes collected; their pay raises are usually uniform and tied to the inflation rate, meaning that excluding costs of maintenance, paying government workers to maintain government housing will go up as consumer price inflation goes up.
Now the government can also contract jobs out, but government people are rather stupid and usually don’t comprehend the specifics of maintenance, as example, Government people tend to think buying the best elevator is smart, forgetting that there’s a COST to service these expensive elevators and hiring an elevator repairman is not cheap and if there are say three elevators in a government building, they’re usually not all going to break at the same time.
Now, that’s only one problem associated with maintaining a building; there are a plethora of other issues to worry about that a private business is better suited to deal with. What I’m getting at here is that the government should stay out of the finances of real estate. The government wasn’t designed to be this involved in the real estate market.
Interesting times ahead!