Tax on homes over $ 1 million could help solve housing affordability and inequality

An additional annual tax on homes valued at more than $ 1 million could help reduce housing inequality and cool housing markets, according to a report.

Paul Kershaw, founder of Generation Squeeze and author of the report published Wednesday with input from 80 experts, said it is part of a set of recommendations that aim to shift the cultural view of housing as an investment to housing as a place to live. .

“Just as the government has put in place a price on pollution to curb our carbon emissions to address climate change, we must also have a price on housing inequity to curb the skyrocketing house prices that are eroding affordability. of housing, “said Kershaw, associate professor at the University of BC School of Population and Public Health.

The report proposes a progressive surcharge starting at 0.2 percent and reaching a maximum of one percent on homes valued at more than $ 1 million. It would be applied annually and paid when the property is sold.

Unlike a capital gains tax on all home sales, it would only apply to the top nine percent of Canada’s most expensive homes, Kershaw said.

The report comes in the same week that BC’s appraisal authority released annual data showing home values ​​rose across the province, some by as much as 50 percent.

The idea is for homeowners to recognize that the system benefits them at the expense of younger Canadians, future generations and newcomers of any age, he said.

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Kershaw said that property taxes based on factory rates only go so far and that other measures such as speculation taxes have not been enough to control house prices.

The report also recommends aligning the mandates of the Infrastructure Bank of Canada and the Housing and Mortgage Corporation of Canada to incentivize lending to expand the cooperative and affordable offering of purpose-built rentals.

Kershaw said that housing inequality is a problem across the country, but it is most severe in Ontario and British Columbia. Administration of the proposed tax would make more sense at higher levels of governments than in municipalities, he said.

The report was funded with support from the National Housing Strategy Solutions Lab Program administered by Canada Mortgage and Housing, but the corporation says in a statement that it is not responsible for the opinions or proposals expressed in it.

The federal Department of Housing, in partnership with CMHC, says in a statement that it is working with provinces, territories and local governments on a Real Estate Equity Action Plan, but will not include an equity tax.

“The federal government has clearly stated on several occasions that we will not introduce an equity tax on primary residences in Canada,” the department says in a statement.

The plan includes a surtax commensurate with “excessive” rent increases applied by homeowners after renovations, an investment tax, and policies to curb excessive earnings on investment property.

“Everyone in Canada deserves a place to call home and we recognize that affordable home ownership has become out of reach for many households in Canada,” the statement said.

The BC Housing Ministry says the rising cost of housing is “worrisome” and will review the report.

The British Columbia government’s housing plan includes cracking down on tax fraud, a vacancy tax and the construction of tens of thousands of new homes, it says.

The Ontario Ministry of Finance says in a statement that it is addressing affordability through a non-resident speculation tax that has reduced foreign investor activity in the greater Toronto and Hamilton area from 4.7 percent of transactions less than two percent.

Last month, the government proposed raising the tax from 15% to 20% and expanding it to cover the entire province.

“By expanding the catchment area to include the entire province and increasing the tax, we will discourage foreign speculation and ensure that our limited supply of housing reaches those who need it most,” the ministry said in a statement.

The Greater Vancouver Real Estate Board said in a press release that changing housing needs during the pandemic drove an all-time high in Metro Vancouver home sales last year.

Sales in 2021 increased 42.2% to 43,999 compared to 30,944 the previous year. The previous record was set in 2015.

Keith Stewart, the board’s economist, said Metro Vancouver residents have been evaluating their housing needs and options in record numbers in recent years.

“The home has been a focus for residents during the pandemic.”

Supply chain problems have also increased the cost of construction and led to delays, according to the Association of Independent Businesses and Contractors.

President Chris Gardner said in a statement that contractors are experiencing delays and challenges in sourcing supplies that have not been seen in decades.

“In an era where housing and construction costs continue to rise seemingly out of control, supply chain constraints are another key factor putting pressure on affordability in the British Columbia market.”

This Canadian Press report was first published on January 6, 2021.