Anyone looking to purchase property in Canada who is not a citizen or permanent resident of this country may not have much time left.
After Canadians go to the polls on Sept. 20, some potential homebuyers may have to wait to buy a property in Canada as both the governing Liberals and opposition Conservatives have pledged to ban foreign buyers from purchasing residential homes in Canada for at least the next two years.
The proposals build upon provincial taxes imposed on foreign homebuyers in the hottest housing markets of British Columbia and Ontario in 2016 and 2017, respectively. While experts have long debated whether those policies have helped address the housing affordability crisis that has since spread beyond the confines of the Vancouver and Toronto regions, one prominent policy director warns a federally-imposed ban could backfire.
“There are some Americans who buy property here, but there are a whole lot of Canadians that buy property in the United States and we need to be very very careful that the Americans don’t respond in kind,” said Mike Moffatt, senior director of policy and innovation at the Smart Prosperity Institute, said in a recent interview.
“You can just imagine all the snowbirds who have places in Florida, Arizona, Las Vegas, and all of a sudden they have to start paying an extra tax? If the Biden Administration or the governor of Florida says, 'Well, the Canadians are going to do that to our people who own fishing lodges in New Brunswick? Okay, we'll put a one per cent tax on any Canadian that owns a home in Orlando.'”
“Globally, we are often the foreign buyers and I don’t think Canadians would be too happy if we were given a taste of our own medicine,” he added.
While there is scant data available that shows how many foreigners own homes in Canada, a study by Statistics Canada in 2017 found that non-residents owned about 3.4 per cent of all homes in Toronto and 4.8 per cent of homes in the Vancouver housing market. Condominium apartments were the most popular housing segment for foreign buyers, with non-residents owning 7.2 per cent and 7.9 per cent in Toronto and Vancouver, respectively, while those numbers fell to 2.1 per cent and 3.2 per cent of single detached homes, according to the StatsCan study.
Canadians are the top foreign buyers of property in the United States, according to the U.S. National Association of Realtors (NAR). Between April 2020 and March 2021, NAR data shows Canadians spent US$4.2 billion on American residential real estate, accounting for eight per cent of all non-U.S. citizens or Green Card holders who purchased American homes during that 12-month period.
Tom Davidoff, a housing economist and associate professor at the University of British Columbia’s Sauder School of Business, said he would be “surprised to see the U.S.” retaliate against Canada’s foreign homebuyer ban, “but if that did happen I agree it would be an increase in the cost of living” for Canadians with American property.
Such a move would also be “met with significant bipartisan opposition from Congressional representatives in both the U.S. House of Representatives and the U.S. Senate,” according to Evan Rachkovsky, a spokesperson for the Canadian Snowbird Association, in an email.
The non-profit advocacy group believes taxing or enforcing other penalties on Canadian owners of U.S. property “would notably affect Canadian tourism and property ownership in the United States [and] in the current session of Congress, both Democrats and Republicans are focused on advancing policies which will increase tourism to the United States,” Rachkovsky said.
Jennifer Keesmaat, founder of Markee Developments and the former chief city planner for Toronto, agreed retaliation against a Canada-wide ban on foreign homebuyers is unlikely. But the policy itself is more about political optics than actually addressing Canada’s housing crisis, she added.
“Foreigners don’t vote so it is a really easy policy for the electorate to buy into, but I’m always wary of policies that aren’t backed up with data and analysis that demonstrates that they are responding to the crux of the problem,” Keesmaat said in a phone interview.
“The risk for me with these types of policies, I put them in the category of 'buck-a-beer' in that they get people excited but they don’t really do anything. It gives people the perception that some action is being taken, but it doesn’t actually address the problem.”
According to UBC’s Davidoff, the impact of preventing those who are not Canadian citizens or permanent residents from buying homes in this country would be negligible at best.
“Maybe if [foreign buyers] were two per cent of the market, then maybe you could double that share and get a four per cent price impact or something like that, but I think that would be on the high end,” he said. “I don’t think entry-level affordability will be impacted almost at all.”
Davidoff and others have long argued the nationality of a homebuyer matters far less than the purpose that newly-purchased home will serve.
“Let’s compare two situations: in one situation, somebody in Moscow buys a condo in Toronto and rents it out … In another situation, somebody in Vancouver buys a little pied-a-terre in Toronto and never uses it, so that is now a unit that is out of circulation in the housing market,” Davidoff said. “In which situation should the buyer get taxed more? The answer is the guy from Vancouver, not the guy from Moscow.”
Ultimately, Keesmaat said banning foreign homebuyers from Canada would not be a “harmful thing” but added, “I’m worried it’s a 'buck-a-beer'-[type of policy], I’m worried it is a distraction from the bigger discussion we need to be having about access to supply. We need to be having a more detailed discussion about why we need to get more housing built.”