OTTAWA (Reuters) - Canadian Finance Minister Bill Morneau is committed to working with provinces to tackle housing affordability, a spokeswoman for Morneau said on Tuesday in response to a request from Ontario that Ottawa do more to clamp down on speculation in Canada’s hot housing market.
Listing the measures already announced to cool the market, spokeswoman Annie Donolo said in an email the government believes all Canadians deserve access to housing that they can afford, but did not mention new measures Ottawa might be considering.
In a letter to Morneau, Ontario Finance Minister Charles Sousa urged the federal government to consider options to improve housing affordability beyond the measures Morneau announced last year. The letter, provided by Sousa’s office, was dated March 17.
Sousa, whose Ontario Liberals have largely worked in harmony with Morneau’s federal Liberals, told Morneau there are “a number of policy levers” available to Ottawa.
“In particular, speculation in the housing market could be addressed by changes to the capital gains treatment of sales of residential housing,” Sousa wrote.
“For example, increasing the capital gains inclusion rate of 50 percent on the sale of residential housing that does not qualify for the principal residence exemption could reduce the incentive for people to make speculative purchases.”
Observers have speculated that Ontario might introduce a foreign buyers tax to dampen investment by overseas buyers, as British Columbia did in August 2016 for the Vancouver market, which has since cooled.
Toronto, Canada’s largest city, has continued to boil, with frequent bidding wars driving up prices, and economists have begun to describe the market as a bubble.
In her emailed response, Morneau’s spokeswoman said the government has studied the housing market since increasing down payment requirements in December 2015.
“Our government is bringing consistency to mortgage rules by standardizing stress tests for both low and high ratio mortgages. Additionally, we’re improving tax fairness by ensuring that the principal residence exemption is available only in appropriate cases,” she said.
Canada’s finance department launched risk-sharing consultations in October to force banks and mortgage insurers to take on more responsibility for the loans they dole out.
Morneau, who is set to announce his second budget on Wednesday, is expected to announce new rules on risk-sharing in the coming weeks.
Reporting by Andrea Hopkins; Editing by Meredith Mazzilli