You know how sometimes if you talk about something enough it will start to lose all meaning? It’s like the words give way to sounds that barely even register.
The board representing 64,000 real estate agents says the speculative tax will hurt “mom and pop” investors
The Toronto Regional Real Estate Board (TRREB) is opposing councillor Mike Colle’s motion to implement a speculation tax on investment buyers who are driving up property prices and making the city impossible for first-time home buyers trying to gain a footing.
“A speculation tax could primarily impact small-scale ‘mom and pop’ investors who also happen to be a key source of supply for an already tight rental market,” said TRREB president Kevin Crigger, painting a quaint picture of the investors bidding up prices in the Toronto real estate market. The average price for a home was $1,163,323 in November, with detached 416 homes averaging $1,807,983. “Experts, including TRREB, agree that policies aimed at the demand side of the market will not have any sustainable long-term benefits.”
Colle, the ward 8 councillor who oversees rapidly developing areas like Yonge and Eglinton and Yorkdale, introduced the motion at City Hall on December 15. The motion, which would ask the Ontario government to introduce a new tax beyond capital gains on flippers and speculators, was referred to an executive committee. The motion did not meet the requisite two-thirds of the vote to bypass a special committee even though the majority of present council members including Kristyn Wong-Tam, Michael Thompson, Joe Cressy, Gord Perks, Brad Bradford and Chair of the Affordable Housing Committee Ana Bailão voted in its favour. Those who are opposed included Ontario premiere Doug Ford’s nephew Michael Ford and Denzil Minnan-Wong. Mayor John Tory was absent.
The motion came along just as the Bank of Canada investment buyers (who make up a quarter of the buyers pool) are driving up real estate prices in Toronto and beyond by competing against first-time homebuyers for limited supply. They are making the housing market even more vulnerable to a correction. Earlier in the year, economists at RBC and BMO warning made proposals that would ward off some investment property buyers fueling a housing bubble including a speculation tax.
But the TRREB, which represents some 64,000 Toronto area real estate agents, is predictably opposed. They, along with the Canadian Real Estate Association and Ontario Real Estate Association, regularly dismiss all possible solutions to cooling an unaffordable market other than creating more supply that they can sell.
In an open letter directed to Colle, TRREB warns that a speculative tax could chase away independent investment property owners putting homes on the rental market.
“Investor-owned housing represents a significant portion of Toronto’s tight rental-housing supply,” the letter states, citing the average rent for a one-bedroom condominium apartment at $2,080. Their warning that rents could go up ignores the possibility that as housing prices keep rising without intervention, investment property owners who pay more will charge more.
TRREB also cites a since-abandoned provincial Speculation Tax in 1974 that affected equity on homes. A similar outcome would be substantial today since homeowners are heavily in debt, maxing out the equity on their over-priced homes.
“The best option would be for City Council to accelerate implementation of its Expanding Housing Options in Neighbourhoods initiative to facilitate a greater diversity and number of housing units in existing neighbourhoods,” says TRREB CEO John DiMichele, a sentiment shared with other experts who have spoken to NOW.
The initiative is looking for ways to build more density into current Toronto neighbourhoods that could sustain them, fighting back against NIMBYism to introduce more low-rise multiunit properties along with duplexes, triplexes and laneway homes in areas where spacious and semi-detached homes take up too much real estate.
Who’s Minding the Store?
We’re seeing it more and more now at AgingParents.com: elders as landlords who can’t do the management job any longer. Sometimes it’s the adult children who bring the issue to our attention. They see Dad failing maintain those rental houses he has had for decades. If tenants complain, he does not do anything. They see Mom fail to collect rents from her commercial enterprise, a small shopping center. They realize that rentable spaces are vacant and have been for some time. No effort to lease them is underway. The kids are alarmed. It may be a single rental home, a commercial building, a vast portfolio or anything the elder owns. Cognitive decline was not anticipated. No one was paying attention and things go wrong.
Financially successful people often invest in real estate, but for those who manage the properties themselves, we see a lack of planning about how to ease out of the management role. The same problem can occur when a property owner has a long time management company which is not held accountable for its work due to the cognitive impairment of the owner. Again, no one is watching management. It is a perfect opportunity for theft from the owner.
Real Life Examples
In one case a wealthy man owned a rental apartment next to his house. The long time tenant took ruthless advantage of the 85 year old owner and simply stopped paying rent. He lived for free and manipulated the owner into thinking the tenant was giving him help in exchange for use of the apartment when no such exchange actually took place.
In another case the 87 year old owner of an office building with long-term tenants in it did not take steps to terminate a very problematic tenant who had been there for 20 years. The landlord hated her but failed to exercise his rights to simply not renew her lease. Instead he waited for her to give notice that she was going to vacate. He had another person interested in the space, willing to lease it but he seemed confused about what to do to secure that new lease. He managed the property by himself.
Both of those elders who were landlords had adult children who could have stepped up. In the first matter, the rental apartment, the elder resisted the son’s attempts to intervene. The elder did have dementia but functioned rather well in other things. He angrily fought his son’s attempts to take over his financial affairs. He had previously appointed his son to do this very thing. The freeloading tenant manipulated the elder into signing an agreement to give the tenant free rent for five years.
In the office building matter, the daughter of the 87 year old was clearly not close to her father and was not paying attention to his confusion. She may have been stopped from getting involved by her father, who was stubborn and unwilling to admit that he was having trouble with managing the investment. In both cases, the only way to prevent abuse and manipulation was for someone appointed earlier to step in and assume responsibility for property management. That works smoothly when the elder is cooperative. It creates a legal mess when the elder resists.
Cognitive Decline and Money Management
Research tells us that even in the earliest stages of dementia or other cognitive impairment, financial judgment is impaired. It is, in a way, the first ability to decline and it is hard to see at first. The older person with impairment for financial judgment can carry on a normal conversation, sound and look okay. But if you asked them about the bookkeeping or accounting, they likely can’t keep it straight. Decline is subtle at the beginning and gets worse over time. Something is amiss before any family member may notice it. Sometimes this leads to loss of value in the property as well as lost income.
What family members can do is to be aware that as a person ages, their sharpness for financial management of property (and other matters too) can slide downhill. If you are aware of aging parents’ real estate investments, it is helpful to educate yourself about them, and to offer to help “in case of any emergency”. Ask your aging parent to teach you about them, even if you know plenty already. This approach can appeal to one’s ego: asking for advice. Do this before you see any sign of a problem and you are likely to be successful in preventing loss of income and value of any real estate they own.
If you simply assume that if Mom or Dad has been managing the family real estate investments for decades and it’s all just fine, you are taking too much chance that it will stay fine. Aging takes its toll. Most of us need some sort of help as we age, especially as we reach 85. By that time, one in three people will have Alzheimer’s disease. If you don’t like those odds, make your best effort to get involved in the real estate they have before the investment loses its value for lack of attention. Fraud is all too common. Predatory real estate brokers, crooked management companies and dishonest tenants can take ruthless advantage of vulnerable elders. Don’t let it happen in your family. If you see your aging parent declining in ability to manage real estate and they fight you on stepping in, it is time to seek legal advice so you can learn what options you have.
Jacques Leclerc moved to Montreal from Detroit in 2019 with a simple plan.
He and his fiance Emily Ciccia planned to rent for a year and then buy a place with a 20 per cent down payment in Montreal.
It’s 2022, and the couple is still renting in Pierrefonds, frustrated, and starting to think a house purchase is not going to happen.
“Honestly, I never think we’ll be able to afford anything on the island, not at this rate,” said Leclerc.
The couple recently put in a bid over asking price on a house in St. Lazare, but they were outbid. It was a result they had already experienced a number of times on the island and were now having to deal with in the suburbs.
Leclerc is one among many potential home buyers seeing record increases in house prices influence where they can afford to purchase, if they can at all.
Royal LePage’s recent House Price Survey for the Greater Montreal Area showed almost a 20 per cent increase in the aggregate house price, which is now $532,600.
The median price for a single-family detached home also increased by 20 per cent and is $595,500, while a condo’s median price is $428,900 (up 18.2 per cent).
The company expects prices to continue to increase in 2022 due to a shortage of housing and continuing demand.
Royal LePage general manager Georges Gaucher said Montreal is seeing what Vancouver and Toronto have been witnessing for decades.
Montreal is about 40 per cent of Vancouver’s prices and 44 per cent of Toronto.
“We were historically behind,” said Gaucher.
Gaucher said with Quebec’s improved economy and job opportunities, investors entered the market ready to buy. The pandemic has added to the price increase causing buyers to go farther afield to find a place, a new trend.
“What we were not used to is going out really far away into the suburbs or cottage country to get a first house,” said Gaucher. “That is something that is unknown in Montreal.”
In addition, areas once considered less attractive – Hochelaga-Maisonneuve, East Montreal, Rosemont, North Montreal – are being looked at.
The situation is exactly what happened to Leclerc and Ciccia. The couple wanted to purchase on island, but are resigned to the fact that it might not be possible.
The house in St. Lazare the couple was outbid on needed a new roof, water heater and other repairs and they still could not meet the price someone else offered.
“What I want to know is who’s buying these houses way over asking price?” said Leclerc.
At the rate the market is going, the couple, who both have decent paying jobs with no children or other major financial obligations, feels they are in a race in which they can’t keep pace.
“Either like I need to be able to just borrow money I’ll never be able to pay back to buy this house or like I need a government subsidy to purchase this,” said Leclerc. “The cost of everything now, it’s like I’ll never be able to catch up at this rate.”
Gaucher said the conditions in 2022 are the same as in 2021.
“Where we have this explosion of buyers,” he said. “Jobs, interest rates, which brings consumer confidence, and then the flexibility of working from home. These were three major elements that created the market last year.”
In addition, Gaucher said the trend of empty nesters selling their houses and moving to a condo or seniors’ residence did not continue during the pandemic.
“People were scared of doing that, so that didn’t happen,” said Gaucher.
Even with the expected interest rate hike in 2022, real estate agents feel the market will remain a sellers’ market.
“There’s a lot of pent-up demand out there,” said Gaucher. “The problem we have is inventory, and we’ve known that for years and years.”
You know how sometimes if you talk about something enough it will start to lose all meaning? It’s like the words give way to sounds that barely even register.
The noise around Toronto’s housing shortage comes to mind. We have been screeching about our unbalanced real estate marketplace for so long that now that we’re truly in the thick of it, there’s not much left to say that could even begin to capture the truly untenable state of things.
And I am certainly guilty of this myself.
Since the pandemic kicked the real estate market into a gear never before seen, it’s been impossible not to comment as we have witnessed the ripple effects of low supply (hello, endless rounds of lockdowns) meeting high demand (hello, those endless lockdowns driving people to reconsider their living situations). The prices simply followed.
It was an incredible thing to witness, discovering that Toronto’s real estate market could barrel through a global pandemic, emerging unscathed, and, in fact, spread its fire in concentric circles around it. I was gobsmacked.
But two years in, rather than slowing down and stabilizing, that momentum has only increased.
For instance, as we closed the door on 2020, I remember writing about how incredible it was that across the entire Toronto Regional Real Estate Board there were all of 8,000 properties available on the open market for sale. At the time that number felt shockingly low. Whoa, I thought, that can’t be good.
Well, one year later, as we prepared to ring in 2022, would it surprise you to learn the available inventory had fallen by another 60%? We welcomed the new year with all of 3,323 properties for sale.
To describe that as chronically insufficient does not even begin to capture it.
But would you be surprised to also learn that 2021 was a record-breaking year for Toronto real estate? It was the most sales we have ever had in one year.
So, when we speak of an inventory crisis we aren’t saying that there are no properties to buy — though our active listings are way down year-over-year — we are mostly pointing to the fact that this market now moves so quickly that any available inventory is swallowed up almost immediately.
The structural aspects of our real estate market have become completely untethered from the market forces that used to drive it.
And yes, the confluence of events that got us here is complex and nuanced, but it should have been increasingly apparent to anyone willing to look for years now. With low interest rates and speculation driving demand, to decades of vastly insufficient housing starts thanks to bureaucratic red tape, restrictive zoning, and NIMBYism, the idea that things will simply self-correct from here seems like magical thinking.
This is a crisis. It’s time our leaders started treating it like one.
Back to school in 4 provinces as Omicron spreads – CTV News
Another COVID outbreak at BGH – Brantford Expositor
Omicron: 'Let it rip' not the solution, experts say – CTV News
Roberta Bondar flew into space 30 years ago and never saw Earth the same after that – CBC.ca
HVAC scams and how to stop them; why can't retail workers get N95 masks? CBC's Marketplace Cheat Sheet – CBC News
China’s Economy Slowed Late Last Year on Real Estate Troubles – The New York Times
5 Year Old Game Also Named Wordle Rides The Wave, Donates Profits To Charity – TheGamer
UK government to cut funding for BBC – Mail on Sunday report