On Thursday, Ontario unveiled a package of measures to cool Toronto's sizzling housing market, including expanded rent controls and a 15-per-cent tax on absentee foreign buyers.
Next week, the province starts collecting data to determine the extent of speculative foreign buying.
Pick your cliché: It's like trying to run before you walk, putting the cart before the horse or the tail wagging the dog.
The province is applying fixes to a problem that it doesn't fully understand because it lacks reliable data.
It can't possibly know how its actions will play out.
No one doubts Toronto has a housing problem. Home prices have shot up more than 30 per cent in the past year. The average price of a detached home tops $1-million, or more than 15 times the median annual household income of Torontonians.
So we know there is an affordability issue.
We also know that too many home buyers are taking on precarious levels of debt in this crazy market. The Bank of Canada has warned repeatedly in recent months about a spike in risky mortgages, particularly in what the province is now calling the Greater Golden Horseshoe, or GGH.
Beyond anecdotal evidence and unscientific surveys, precious little is known about how much of the overheating is due to normal market conditions (population growth, immigration, lack of supply and the like), and what's speculative froth caused by an unusual influx of foreign cash. The best industry estimate is less than 5 per cent. But maybe it's 2 per cent, or 10 per cent.
No doubt, some buyers are treating housing like the stock market – either as a store of value or to generate rental income – rather than a place to live. But these speculators are just as likely to be Canadian as foreign. And so far, Ontario has not moved to thwart domestic speculators.
Unfortunately, federal and provincial officials don't have a clue how much of the apparent price bubble is due to speculation versus other market forces. And they can't possibly know how much of the upward price pressure is caused by foreign buyers.
Ontario is right to be gathering more data about buyers, including where their citizenship is and what they intend to do with the property. British Columbia started doing the same last year.
But they're late to the party.
It will likely be a year before Ontario has a clear picture of what's really happening in the real estate market from the data it collects. And by then, the market may have gone cold. Indeed, if the market is already cooling, the new measure would be counter-cyclical, with unpredictable consequences.
Ottawa is also investing heavily in more timely national housing data. The Liberals are giving Statistics Canada an extra $40-million over five years to gather information about foreign ownership of homes, demographics of homeowners and the mortgage market. Statscan won't start publishing its new "housing statistics framework" until the fall.
What the measures do address, however, is a political problem, as it was in British Columbia. Ontario and Ottawa are feeling heat from voters over what's happening in the housing market.
Young families wonder if they'll ever be able to get into the market. Older homeowners wanting to downsize find they're buying into a market that's just as hot as the one they're trying to escape. And financially stretched owners worry the bubble may soon burst, leaving them with little or no equity.
Without a proper diagnosis, Ontario risks exacerbating the crisis.
At the other extreme, if its actions don't fundamentally change market conditions, there will be profound disappointment.
Taking on foreign speculators is unlikely to change the fundamentals of the market, which is being propelled higher by powerful forces. Prices will stay high in Toronto because economic opportunity is drawing people there. A home in Toronto will still cost way too much. And, as long as interest rates stay low and the economy doesn't falter, there will be plenty of fuel stoking the market.
Toronto and Vancouver are world-class cities where people will want to live and work, now and in the future.
That's not something governments can or should discourage.
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