The Greater Toronto Area is heading into a catastrophic housing bubble, some experts warn, pointing to a raft of scary statistics, such as the sale of detached homes averaging $1.2 million in February, a 32.5-per-cent increase over a year earlier. In a panicked response to this possible crisis — the 2007 U.S. housing bubble is still fresh in people’s minds and some still shudder over Toronto’s 1989 housing bubble — politicians, planners and pundits are recommending everything from tighter lending rules, to a tax on purchases by foreigners, to subsidies for more affordable housing. With the federal and provincial governments running worrying deficits, fears abound that a housing shock could send Canada into recession.
Rather than trying ad hoc reforms designed to tamp down housing fever without harming economic growth, the politicians and planners should let the free market normalize the housing market by eliminating discrimination against tenants. The bubble would quickly disappear, ending its risk to the greater economy as well as ending a major injustice to those who are less well off.
For most homebuyers in the Toronto region, the choice is between renting and buying — 53 per cent of GTA homebuyers are first-time homebuyers, according to an Ipsos survey conducted for the Toronto Real Estate Board. Many tenants look at the rent they’re paying, compare it to the cost of carrying a starter home, and decide that, on balance, they’d be better off jumping into the housing market. What they don’t realize is that they’ve been pushed into making the jump because the scales have been tipped against tenants and for owners by governments at all levels.