On April 20, 2017, the Ontario government announced a series of measures that are intended to temper the soaring real estate market in and around Toronto. The two most significant aspects of the province’s 16-point plan are the introduction of a “non-resident speculation tax” (“NRST”) and the expansion of rent control to all private rental units in Ontario. This bulletin is intended to provide an overview of how these changes will practically affect the real estate market and its participants.
Non-Resident Speculation Tax
The province announced that it will introduce legislation that, if enacted, will impose a 15% tax on homes purchased in the “Greater Golden Horseshoe” by individuals that are not Canadian citizens or permanent residents of Canada or by foreign corporations.
The NRST would be effective as of April 21, 2017; however, the tax will not apply to binding agreements of purchase and sale that were entered into on or before April 20, 2017. This means that the NRST will not apply to a foreign individual that has signed a binding agreement to purchase a home on or before April 20, even if the transaction does not close until a later date.
The NRST will only apply to homes within the Greater Golden Horseshoe, which the province defines as the region that spans roughly from Peterborough to Niagara. Specifically, the following geographic areas will be affected: Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Toronto, Waterloo, Wellington and York.
It appears that the NRST will not apply to a Canadian citizen or permanent resident of Canada even where that person does not ordinarily reside in Canada, regardless of the person’s intended use of the property. In addition, there will be several exemptions and rebates available to persons that would otherwise be caught by the tax; for example, the NRST will not apply to a foreign national who purchases a property that will be his/her principal residence, as long as he/she also receives confirmation under the Ontario Immigrant Nominee Program.
The government’s housing plan will also expand the province’s rent control policy to all private rental units in Ontario, regardless of when the units were built (under the existing rules, rent control does not apply to buildings that were constructed after 1991). Under the new rules, landlords will only be allowed to increase their current tenants’ rents by an amount that approximates the rate of inflation.
It should be noted that the province’s plan includes a series of other measures that are designed to address the issues caused by ever-increasing house prices. For instance, the province will seek to incentivize builders to increase the province’s housing supply, and in particular the supply of residential rental units, and plans to enact legislation that would enable the City of Toronto (and “potentially other interested municipalities”) to levy a vacant homes property tax.
- April 21st, 2017
- Posted in: Tax