Stupidity seems to be a pre-requisite to be a Liberal cabinet minister
The law of unintended consequences will prevail
Crystia Freeland delivered the fall budget update and proudly announced the government would “crack down” on short term rental properties and make it unattractive to operate on VRBO or AirBnB, thinking these properties would add to the rental market and bring down rents as well as making more homes available, all part of the Liberal charade pretending to take steps to solve the housing crisis they created with artificially low interest rates and massive deficits. The opposite will happen.
Most of the condominiums offered as short-term rentals only found buyers because investors thought they could buy a property, mortgage it at a low 1-2% rate, rent it on AirBnb or VRBO for rent that would cover carrying costs, and flip it into the market when prices rose. With the Bank of Canada driving up rates from near zero to the 5% to 7% range for mortgages, that game is over. The investors who contracted to buy units in buildings under construction are now flooding the “black market” for assignment sales, taking whatever losses they need to now to avoid owning a property that cannot be rented for enough to carry the condominium fees, taxes, maintenance and mortage payments.
Existing condominiums face the same problem - they can’t refinance at a rate they can pay, so mountains of units will flood the market at discounted prices. Developers will have trouble finding buyers for new buildings let alone finding people willing and able to close on contracts in the “assignment market”. Bankruptcies, both personal and corporate, are in the cards as well as some losses to bankers. Instead of adding to supply, this nonsensical move by the Trudeau Liberals will shrink supply and drive up rents.
TD Bank forecasts Toronto home prices will fall about 10% in the first quarter of 2024. I think likely more. Those lower prices may seem attractive but a 10% lower price with a 5 percentage point higher mortgage isn’t more “affordable”. A lot of units that were once available on short term rental markets like AirBnB and VRBO will now remain empty, likely with unpaid condominium fees and taxes and insolvent owners. Those units, while not on the longer term rental market, had occupants and those occupants will now have to find somewhere else to live unless they only used short term rentals as a hotel alternative. Now they will have to fill up hotel rooms, competing with city managers trying to find places to house the homeless.
Housing need is high but prospective buyers can’t afford to buy and will find that in our rent-controlled environment, no sensible owner will enter into a lease with a tenant that perpetuates the losses they face today with no prospect of ever raising the rent to an economical level. They will just bail, discounting the price to get out.
The capital losses on the properties dumped will reduce Ottawa’s tax revenue, and homelessness will increase. Ottawa had the option of dropping HST on rent to ease the cost of housing, dropping the HST on all residential construction to spur added supply, and encouraging provinces and municipalities to deregulate home building. Not in Liberal Canada. Instead, they attack the young investors who provided the capital to fuel the condominium boom in major cities and made it harder for young Canadians to ever own a home.
It is clear that stupidity is a prerequisite for a cabinet post in a Trudeau government.
Wall Street Journal agrees with me. https://www.wsj.com/economy/housing/canadas-real-estate-market-stumbles-as-rate-hikes-bite-24a8a2da
Stupid?? They just looking to get more tax revenue and good press talking points. Targeting people who own rental real estate is good press to most. Look how Targeting the grocery industry, people mad at the grocery stores and not the political leadership..
Lot more renters than landlords to vote...