The Ontario government will take matters into its own hands by raising its tax on non-resident homebuyers if the federal government doesn’t make good on a campaign promise to clamp down on foreign buying activity, BNN Bloomberg has learned.

“Ontario is prepared to raise the Non-Resident Speculation Tax (NRST) to 20 per cent and expand its catchment area beyond the Greater Golden Horseshoe,” said a senior Ontario government source, who later added the tax could eventually rise to more than 20 per cent. 

“By expanding the catchment area to include the entire province and raising the tax, we will discourage foreign speculation and make sure our limited housing supply is going to those who need it the most.”

The province’s foreign homebuyers tax currently stands at 15 per cent and was implemented on Apr. 21, 2017.

The Greater Golden Horseshoe encompasses regions as far north as Barrie, as far south as Niagara, and stretches from Waterloo to Peterborough on a west-east basis.

On the campaign trail, the federal Liberals promised to ban foreign home purchases in Canada for a period of two years but no further details have been released since they were re-elected in September.

Meanwhile, Greater Toronto Area home prices hit an all-time high for the third straight month in November, and rural regions have also experienced rapid growth in home prices.

The source told BNN Bloomberg that the Ontario government will be looking for details on the federal government’s plan when Deputy Prime Minister and Finance Minister Chrystia Freeland releases the economic and fiscal update on Tuesday, and warned if there’s no indication the ban will be implemented in due time, the province will begin taking action on its own at the beginning of next year.

The source added that Ontario would also be prepared to tighten exemptions from the non-resident speculation tax – particularly for foreign students and international workers.  

Jason Mercer, chief market analyst at the Toronto Regional Real Estate Board, said he’s not surprised to hear talk of non-resident taxes surfacing again given Ontario’s rapidly approaching provincial election this coming spring, but said foreign investors make up such a low market share of real estate in the Greater Toronto Area that increasing this tax would have a limited impact on affordability.

“It’s a little bit disappointing in the sense that we wouldn’t be talking about foreign buyers, we wouldn’t be talking about speculators, if we didn’t have this longstanding issue with bringing on enough supply to meet population growth,” said Mercer, in an interview.

“What we would really like to see is how these individuals and parties that are vying for office, how are they going to serve this long-term supply issue?”