Developer Drama & Housing Lag

👀 Inside Toronto Developer Mizrahi’s $58M Debt Drama

• Sam Mizrahi, developer of Toronto’s The One, faces allegations from Alvarez & Marsal that he owes $58.8 million to lenders for breach of contract and overcharging.

• The receiver claims Mizrahi’s company overbilled for labor costs and collected excessive fees despite poor performance; replacement contractors now charge significantly less.

• Court filings accuse Mizrahi of taking $1.8 million in commissions from defaulted sales, including high-profile buyers like a U.S. fraud convict and a Liechtenstein princess.

• The One, 74 stories tall out of a planned 85, faces completion delays until late 2027, while Mizrahi’s other projects, including Ottawa’s 1451 Wellington, are also under financial distress.

Why it Matters: Even marquee projects with big names face financial and operational issues. Mizrahi’s developments show that prestige doesn’t ensure smooth sailing, as delays and mismanagement can seriously impact investment timelines, making transparency and milestones crucial in decisions.

🏗️ Ontario’s Housing Goals Face Major Setback

• Ontario lowers housing projections, further missing targets to reach 1.5 million homes by 2031

• 2024 housing start forecast is 81,300, short of the 125,000 target

• Ford government aims for 1.5 million homes by 2031, yet the highest projected housing starts fall to 95,300 in 2027

• Ontario’s housing starts increased by 3.8k in September, bringing the total to 61.2k

Why This Matters: Ontario’s housing goals are slipping, with the 2024 housing start forecast dropping to 81,300, well below the 125,000 target needed to reach 1.5 million homes by 2031. Recent growth in starts, like September's modest 3.8k increase, shows some movement but falls short of the pace needed.

(source)

📉 Canadian Permanent Resident Applications Plunge 57%

• Canadian permanent resident applications dropped to 17,000 in July 2024, 

• This marks the third consecutive month of double-digit negative year-over-year growth.

• July 2024's numbers represent one of the lowest application months in the past 3 years.

• Canada recently announced plans to reduce its 2025 permanent resident target from 500,000 to 395,000

Why This Matters: This dramatic drop in permanent resident applications signals a potential cooling of Canada's immigration-driven growth strategy. The government may have implemented these limits knowing about declining applications, potentially to appear in control of the situation rather than reacting to decreased interest.

💸 Ontario’s Airbnb Rentals Now Hit with 13% HST

• The Tax Court of Canada rules that Ontario short-term rentals must pay 13% HST on the rental value if rented frequently on Airbnb or similar platforms.

• The decision stems from a case in which an Ottawa condo owner who rented the unit on Airbnb for over a year before selling faced a $77,079 HST bill.

• Long-term rentals remain HST-exempt, but short-term rentals classify a property as commercial use, subjecting it to HST.

• Consistent short-term rentals (over 90% use) prompt the HST application, while occasional rentals remain unaffected.

Why This Matters: Ontario’s new tax ruling for Airbnb and short-term rental sales brings a hefty 13% HST charge, treating these properties as commercial assets. This means big potential tax hits for investors who sell properties primarily used for short-term rentals. With similar rulings likely on the horizon, real estate investors in the short-term market may need to re-evaluate holding strategies, as tax implications could cut into profits and overall ROI.

📝 Key Updates for Ontario Agents

• Ontario's Trust in Real Estate Services Act (TRESA) is to help modernize outdated real estate regulations. Here are the updates

• Consumer Protections:

  • Require auctioneers to register with RECO.

  • Strengthen disclosure rules for hidden defects and guaranteed sales programs.

  • Place RECO under Ombudsperson oversight.

• Education and Professionalism:

  • Add a two-year mentorship for new agents.

  • Allow specialty certifications (e.g., agricultural, waterfront).

• Penalties for Misconduct:

  • Introduce fines for minor infractions and allow RECO to reclaim unethical earnings.

  • Increase the "cooling-off" period after registration revocations.

Why it Matters: By implementing updated practices like transparent offers and designated representation, TRESA reduces risks and improves market accountability. This legislation is essential to maintaining Ontario’s leadership in real estate professionalism, making transactions safer and more reliable for everyone involved.

🤔 WTF of The Week

So, according to the Immigration Minister, we need 670,000 fewer homes by 2027 because of the reduction in immigration… Sure, if the goal is to prop up home prices for the lucky few.

But let's get real—Canada’s been slacking on housing for decades, building half as many homes per capita as we did 50 years ago.

Those 670k homes? They still need to be built. We’re already drowning in a housing shortage, and no immigration tweak is getting us out of this mess!

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