Will Ontario's plan to cool housing work or do more harm? Both say economists

After months of debate on how to cool Toronto's super-hot housing market, the Ontario government today . Measures include a 15-per-cent foreign buyer tax, expanding rent control, allowing Toronto to impose a tax on vacant homes and using surplus lands for affordable housing.

But will it work — or will it do more harm than good

Here are thoughts on that from some of Canada's top economists:

Benjamin Tal, CIBC

Robert Kavcic, BMO senior economist

"Non-resident tax: The Province is aiming at those effectively parking wealth in the GTA real estate market, and we have been fully in favour of such a move for some time. Look for a modest negative impact on price growth and sales at the high end of the market. The impact will likely be less than that seen in Vancouver, given that the non-resident investor share is by all accounts smaller in the GTA (the Finance Minister cited 8% today), the move comes with more exemptions, and it was well telegraphed. Absent—any measures to target domestic speculation: Rent control: The concern here is that this fans longer-term excess demand in the rental market, when vacancy rates are already barely more than 1%. That is, less incentive to bring supply to market in a timely fashion, and more incentive to stay put in an increasingly underpriced unit (landlord own-use eviction rules will be tightened to boot). Note that chronic underbuilding came to a swift end in the late-1990s when rent controls were removed. From an investors' perspective, buyers will have to adjust their rental growth assumptions accordingly. {“content”:”

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