Jim was recently interviewed by Jill Mahoney from Globe and Mail about the effects of Foreign Buyer’s Tax on Toronto. Here is an excerpt from the article: 

In all, 3.8 per cent of homes sold in the city of Toronto were to buyers who were not citizens or permanent residents between mid-August and mid-November, down from 5.6 per cent for the previous three-month period.

In the wider Greater Golden Horseshoe region, 1.9 per cent of residential properties were bought by people from abroad, down from 3.2 per cent.

The government’s data come amid continued debate over the role of international capital in the Toronto area’s real estate market.

Some analysts and home buyers believe wealthy foreign buyers are pushing prices beyond the reach of many local residents, while the real-estate industry argues the main challenge is strong demand and a shortage of housing supply, rather than small numbers of non-citizens.

Foreign purchases began to fall in the vast area around Toronto after Premier Kathleen Wynne’s government introduced its tax in April, according to Finance Ministry figures. Before the move, the real estate market appeared to be overheating, as average home prices soared to nearly $1-million in the Greater Toronto Area. After the tax, the market entered a downturn.

The government on Wednesday said the overall housing market “continues to show stable growth,” while noting that Greater Toronto Area home resales fell 13.3 per cent and the average price dropped by 2 per cent last month from November, 2016.

Real estate agents who work with foreign buyers said many are waiting out the market’s turbulence.

“[The tax] forced everybody to the sidelines for no other reason than psychological because it was new and they wanted to see what kind of an effect a government intervention like that was having,” said Jim Burtnick, a Toronto broker who works with international clients

People want to make sure that they’re not catching a falling knife, that the sky’s not falling, and once they realize fundamentally nothing’s changed and everything’s pretty stable, I think you’ll see that it’ll pick up again.

Mr. Burtnick said foreign investment could also be down because some buyers are finding ways to avoid paying the tax, such as by registering properties in the names of relatives who are Canadian citizens or permanent residents. “People are generally pretty resourceful,” he said.

If you are interesting reading the rest of the article, head to The Globe and Mail site and read it here. 

Toronto’s Kingsway is 20 mins to downtown, surrounded by beautiful nature, rivers and walking trails. Its outdoorsy vibe, beautiful architecture, mature trees and manicured lawns make it a perfect family neighbourhood.

It is the perfect choice for people looking for little more space than what’s typically offered in the downtown core, with a bit of backyard, community feel and great schools.

Find out more about Kingsway in the video below.

Rent control is one of those thorny problems that seems like a great idea but inevitably fails to deliver. Today, we’re going to cover why rent controls have been implemented, and why they pose unique long-term consequences for Toronto.

What are rent controls?

First, let’s clarify what rent control actually means, and then how it’s been implemented in Toronto.

Rent control is a system implemented by a government to restrict how much and how often a landlord can increase rent. In Toronto, how much a property’s rent can be increased is decided annually by the Ontario Government based on the consumer price index, or CPI. Essentially, rent-controlled properties cannot be increased more than inflation, cannot be increased by more than 2.5 per cent, and can only be increased every 12 months.

Traditionally, rent control has been in force in Toronto. But then in 1997, the conservative government under Mike Harris eradicated controls on new buildings. Anything built after November 1991 wasn’t subject to rent control guidelines.

However, they basically grandfathered in any building built before November 1991, leading to what’s usually called ‘the loophole’.  If it was constructed before 1991, then rent controls were in effect. After 1991? It was not in effect.

Well, it worked—with rent control removed on new buildings, dozens of condo towers and housing highrises started going up, and rental and housing supply increased significantly.

Fast-forward to 2016/2017 and again, Toronto is in a housing crisis. There’s simply not enough rental property for everyone who wants it, and prices reflect this scarcity. We’ll get into the economics in a minute but what was driving this crisis wasn’t arbitrarily high prices, but rather a tremendous influx of new people to the city.

With pressure mounting for change, the provincial government reversed the 1997 decision. Now, rent controls were back on for everyone.

The case for rent control—what they tell you

Rent control seems like a good idea because of inelastic demand. People need a place to live and so they’re usually willing to pay extraordinary prices to keep their homes. For example, imagine that your favourite brand of liquid laundry soap suddenly increased their prices by 1500 per cent. You’d probably just stop buying that brand. Even if every liquid laundry soap increased their prices by 1500 per cent, you could always buy powdered laundry soap or even a natural alternative.

In short, your buying behaviour is heavily influenced by price, that is, it’s elastic.

With rental property though, this is far less accurate. People are generally willing to give up many other things before they move out of their homes, even as rental prices increase. They are very insensitive to price, and thus, the demand is fairly inelastic. No matter what, they want their home.

Obviously, just like a drug dealer can jack up the price of cocaine and not see a significant drop-off in sales, so too can landlords potentially increase the price of rental property without significant risk of losing tenants.

So rent control is positioned a bulwark against the inherent greed of landlords (or so the story goes). By limiting the rental increase amount, rent is stabilized, and people can live in their homes. By keeping up with inflation and having provisions in place so that landlords can increase rent both between tenants and if they make significant improvements, they continue to make a tidy profit without devastating tenants.

So goes the argument for rent control.

But that’s not the whole story.

Everyone wants to live in Toronto.. and who could blame them??

The supply side of rent control

So far we’ve looked at demand. But the second important thing to consider is supply—who is building new buildings for tenants, and how does rent control affect them?

When rent controls are in place, developers and investors are significantly less likely to drop the serious wads of cash needed to break ground on a new building.

Why?

Two reasons. If the developer is planning on managing a property and continuing to hold it on their books, their potential return on investment is far lower. What’s more, developers might end up in a position where other costs increase but they’re unable to increase their revenue, resulting in losses.

According to Jim Burtnick, SVP of sales at Sotheby’s International Realty Canada, landlords already experiencing this problem with rising property taxes, water, and hydro bills eroding their ROI.

Second, if a developer is planning on selling the building as condo units, it’s a much harder sell to those looking to use them as investment properties. Since that’s a major market in urban centres, it makes the building more difficult to sell which in turn makes them more difficult to build. Jim Burtnick tells us:

If we didn’t have these foreign investors buying condos pre-construction, first of all these buildings wouldn’t be going up as quick as they are because they need to typically get to a 70-75 per cent threshold of being preconstruction sold for a developer to get financing.

Without investors purchasing condos pre-construction, Toronto would have far less housing stock than it does and be in a far worse off position then it currently is.

By making them more difficult for developers to sell pre-construction by limiting the potential ROI, rent control negatively impacts the total units available in the short- and long-term. And therefore, harms renters.

Toronto by Lisa De Jong

(unintended) consequences

Now we all know that a supply/demand graph is a great place to start, but often doesn’t tell the whole story of any property market conundrum. Human nature, government policy, and international factors all play a role.

And rent control is no exception.

When rent control is implemented, there are two significant unintended consequences. First, because rents can only be raised in line with government policy annually, BUT can be raised as much as landlords want between tenants, renters are extremely reluctant to move.

For example, the Financial Post reported an anecdote about how Norah Ephron (net worth: $15 million) lived in a rent-controlled apartment in New York City for years, paying a mere $1,500 p/month in rent rather than a market estimate of $12,000.

According to Jim:

Tenants have no incentive to leave… because they know their rent [increases] are capped at 2.5 per cent.

The point is that rent control discourages people from moving around different properties, thereby reducing the flexibility of the market and reducing vacancy rates.

To sum up:

• Rent control is used to lower the cost of rent for renters over time and provide a stable, shock-proof rental environment.
• The idea is to separate the rental market from the property market to better serve renters who are at the mercy of landlords (in theory).
• In reality, rent controls disincentivise investment and thus limit supply of new rental accommodation
• Rent control also stops people moving around, further reducing vacancy rates.

The result? Rent control actually harms the rental market.

A better way

Rent control is the tool of choice for politicians because it’s a surefire way to capture votes. That’s why it’s so often the chosen solution for housing challenges in cities like Toronto.

The problem is it doesn’t work. So is there a better way?

According to Jim, the solution is really all about the basic economic equation – increasing supply faster than demand increases. With 100,000+ new immigrants every year to Toronto and long-term projected GTA growth of 42 per cent by 2041, demand isn’t going anywhere.

We need to foster an environment that attracts new investment and facilitate developers doing what they do best – breaking ground on new buildings.

In short, the best way we can serve the expanding rental market in the long term is a significant increase in how many houses there are in Toronto.

And the best way to do that is to make it easier for developers to do what they do best—the government just needs to get out of the way.

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Old East York is a perfect neighbourhood for young families looking for large lots with big backyards and a driveway, to either build new construction or renovate. It’s close to parks, rivers and to the Lake.

Old East York has the best of everything in Toronto – it’s midtown oriented, so it’s close to downtown or uptown and it’s an affordable area just beginning to gentrify.

Learn more about Old East York with Jim Burtnick in the video below.

Alex Bozikovic is a National Magazine Award-winning writer and staff editor at the Globe and Mail. Specializing in all things architectural, he also serves as the Globe’s architecture critic, and recently published his own updated version of the late Patricia McHugh’s book Toronto Architecture: A City Guide.

Can you describe your connection to Toronto, and, have you always lived here?

Yes, I’m more or less a native. I was born in North York and lived in the city in the suburbs for most of my life. I spent a couple of years away living in the New York area, but I have always been in Toronto and in the GTA. In fact, I have connections to several different places in and around the city. My mother grew up in Scarborough, my first home was in Downsview, I lived in North York, and then in York region, and now, finally, downtown. So a lot of places are home-ish. A lot of parts of Toronto are familiar to me.

What led you to become an architecture critic?

I was interested in cities and in urbanism and architecture growing up. Then as an adult in my twenties I decided I wanted to pursue architecture and urbanism as subjects, and just decided—more or less on my own—to chase those and educate myself. So I professionally sort of stumbled into covering architecture. One of the privileges of being a journalist is that you can write about things that you don’t necessarily know much about. If you push hard enough and ask the right questions you can find a way to do it.

So I started actually by writing for the magazine Azure; that was an important first step for me. They took me on when I was a freelancer. So through articles for that, for newspapers, and for other magazines, I started by writing about individual buildings – often houses, initially. And then I started to become aware of some of the larger questions about how cities are made. And where I can I’ve been trying to pursue some broader questions and broader themes.

Since I took on this role at the Globe I’ve had a lot of freedom to explore across a country – and sometimes out of the country—and to think in a holistic way about buildings and cities and the forces that shape them. It’s not just about individual buildings, but also about urban design, about urban planning, about broader questions that affect cities—around transportation, around the environment and climate change, and the social and economic context that shapes cities and buildings.

OCAD University by Vik Pahwa

What made you decided to update Patricia McHugh’s architecture guide as opposed to creating one of your own?

I got the call from the publishers McClellend and Stewart to discuss a new edition of this book. It had been out of print for a long time, but it was a book that continued to be read, continued to be in demand through libraries and book sellers. So it was a book that still had relevance. I had a copy of the book and had used it extensively, so I was excited to get the chance to revisit it.

It was the only comprehensive text on architecture and building in Toronto. It was also kind of intimidating in a sense because it was such a big project, and you do need to cover ostensibly two hundred years of history—not all of which I knew that well. In that sense, having Patricia McHugh’s edition to work with was reassuring, in that I could keep those pieces of her work that were still current and were still relevant, and also bring it up to date with some of the tremendous change that has happened in this city over the last 30 years. And put my own stamp on it.

Old City Hall by Vik Pahwa

McHugh was from the U.S originally. Do you think that being an outsider here shaped her perspective in a useful way?

I do. I think that outsiders who have come to the city—particularly Americans—have come here in many cases and seen what is good about the culture of this place, and have seen what is beautiful and interesting about Toronto. As outsiders, they’ve escaped the culture of self-deprecation. People from here tend to think of Toronto as being somehow inferior to other places. I mean, even if their own lives are good, even if their experiences of the city are positive, somehow life is better elsewhere.

I think if you come from somewhere else—as Patricia McHugh did—you don’t get that. So she loved the place, and she brought a critical eye and also a well-informed eye to the city. I’ve tried to do the same thing; I’ve tried to escape our usual restraints of thinking about Toronto, and tried to see the place through its history as what it is. As it really is.

[clickToTweet tweet=”People from here tend to think of Toronto as being somehow inferior to other places. Even if their own lives are good, even if their experiences of the city are positive, somehow life is better elsewhere.” quote=”People from here tend to think of Toronto as being somehow inferior to other places. Even if their own lives are good, even if their experiences of the city are positive, somehow life is better elsewhere.”]

I like to think that Toronto is full of places that an architecture critic would find interesting, but can you talk about a couple of specific buildings in Toronto that you think are particularly notable?

There’s one block that I like to take people to; it’s my favourite block in the city, which is part of the University of Toronto. It’s just east and south of St. George and Bloor, so on that block you have a few buildings that I think are extraordinary. You have Massey College, which was finished in the early 1960s, and is a really beautiful building that was designed by the Vancouver architect Ron Thom, which is a very personal and idiosyncratic version of modernism. It’s very warm; he uses a lot of natural materials, a lot of wood and brick, and it also has some ornaments, which looks back to Frank Lloyd Wright—ornament was something that wasn’t very popular through the 1960s, so this is a blend of different streams of 20th century architecture, and it’s very humane, and comfortable and beautiful. 

On the same block is another one that I think really represents the city, it’s called Woodsworth College. So Woodsworth College combines this couple of very grand Victorian mansions on St. George street with the brick and sandstone that was typical of houses in the Annex in the 1880s and 1890s—which still are very beautiful. And the new building that was added on to it is mostly a new addition from the 80s.

Woodsworth College by Vik Pahwa

It was designed by the architects KPMB very early on, just as they were starting their office, and it does a few things. Number one, it is very retiring. It’s a modern building that– in terms of the way it’s arranged on its site—defers to the older buildings that were there before. The materials it uses are stone and wood, which, again, are deployed in a contemporary way—deployed in a modernist way—but are very harmonious with what was there before. And it uses landscape. The architecture makes space for landscape—for a courtyard, you know, which is actually an important piece of it. So it’s modernism, but it’s modernism that defers to the 19th century streetscape. It uses details and materials that are very warm and humane, and is designed in a way to sit back, rather than to push forward.

And I think that’s an important building in Toronto, because it represents maybe the most distinctive thing about Toronto architecture in the last hundred years, which is this: modernism in Toronto didn’t really overpower the 19th century city, and that’s an important thing because a lot of architects of the 1950s and 60s had a really hostile attitude towards the cities they were working with. They didn’t see a lot of value in older buildings, in older blocks, and in Toronto people did.  And the new buildings that were added, you know, in many cases people took care to preserve what was there before, and to not wipe out what had been good about the city. And I think that not many places have done that so well. And the result—when you have that conversation between the old and the new, the result… that product can be very beautiful, and I think that the presence of the past is important to architecture in Toronto. And that’s really one of the strengths of design here in Toronto; that in inventing the new city, we didn’t quite erase everything that came before.

[clickToTweet tweet=”Modernism in Toronto didn’t really overpower the 19th century city, and that’s an important thing because a lot of architects of the 1950s and 60s had a really hostile attitude towards the cities they were working with.” quote=”Modernism in Toronto didn’t really overpower the 19th century city, and that’s an important thing because a lot of architects of the 1950s and 60s had a really hostile attitude towards the cities they were working with.”]

What are your favourite cities, architecturally speaking?

Ohhhh, that’s a tough one. In terms of urban form, I would say it’s probably Amsterdam. You get a city that is consistently dense, so you get a lot of people and a lot of social life and a lot of commerce and a lot of culture, and all the benefits of having a lot of people living in an urban form that is also, very humane and very comfortable.  And there’s a coherence to the blocks that’s very pleasing.

On the other hand, I also like a certain amount of chaos, and a certain amount of disorder in cities is impossible to avoid. And in its own way it can be beautiful. And I love New York—as almost everybody does—even for the discontinuity, and sort of the way in which, you know, the  buildings in the city have accommodated people from so many different cultures, and there’s an interesting tension in New York between very tough constraints and really bold imagination. 

So two very different cities, which have their values; coherence and sticking together in Amsterdam, and jostling, boisterous and ambitious New York.

Hockey Hall of Fame by Vik Pahwa

Critique implies that you know what should be done. Given this, what should Toronto be doing in the architecture and urban planning department?

I think two things. Number one, Toronto has experience building new buildings that fit in with older ones, and I think we aren’t doing enough of that today. In a nutshell I think that more small-scale housing spread right across the city, both the old and new city, would be a great way of intensifying the city. I think it would be good economically and culturally for the city if we did that, if we built many smaller buildings—rather than a few towers—to spread out some of the people and the wealth into some of the neighbourhoods where many of us already enjoy living.

One more point though, about what Toronto should do. Architects use the term ‘vernacular’ to refer to the way that people build. And in Toronto in the 19th century there was a vernacular; you used brick, you built to a certain height, you used certain kinds of decoration and ornament to build your buildings. So there was a clear culture of building. Now we don’t have that so much any more, and I think it would be really interesting to explore what a new Toronto vernacular would look like. I think it would be really interesting if a lot of the new buildings in the city used good quality brick, and tried to use a certain traditional style, a certain consistency in their size and scale.

[clickToTweet tweet=”Toronto has experience building new buildings that fit in with older ones, and I think we aren’t doing enough of that today.” quote=”Toronto has experience building new buildings that fit in with older ones, and I think we aren’t doing enough of that today.”]

QRC West by Vik Pahwa

Should architects always be artists?

I think architecture at its best is art, but architecture is also the product of constraint. Buildings are shaped by technology, by economics, by planning restrictions, and by the culture of the place where they sit. They have to be. And to me, that’s what makes them interesting. Looking at the streets of Toronto, and looking at the buildings of Toronto, if you read them in the right way, you can understand a lot about the kind of place this is. Buildings reflect who we are. They way we build reflects who we are. So yes, architecture can be art—at its best it is art—but it is always something that is a product of a larger culture. And at its best it can do that while also being really beautiful.

What do you see as the proper role of an architecture critic?

For me, it is to explain to people why design matters to the way we live. To argue for examples of good design that are shaping the future we want to live in, and to help create an understanding of what makes for a good building, a good block and a good city. People don’t always understand why a building is good, or why a building is bad. They may not think about it. And I think it’s important to give people the tools to assess. I’m making judgments, but I also want people to develop the tools to make judgments for themselves, and to help build a better city.

JN00KV

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