Tax on luxury residences? New report suggests it for Canada

TORONTO –
A new report on housing affordability calls for a surtax on homes worth more than $ 1 million to curb soaring house prices and fund affordable housing projects.

The report was published by Generation Squeeze, a Vancouver-based non-profit organization, and received funding from the Canada Mortgage and Housing Corporation (CMHC) as part of the federal government’s National Housing Strategy, which allocates funds to researchers in housing policies.

The proposal would set an annual surtax starting at 0.2 percent for homes valued over $ 1 million, then increasing to 0.5 percent and one percent for more expensive homes.

For people with limited incomes, such as the elderly, the report suggests that taxes could be deferred until the home is sold or inherited.

An RBC report last month found that housing affordability in Canada is at its worst in 31 years.

“If a pandemic-induced recession is insufficient to slow house prices, we can no longer ignore the likelihood that our housing system will actually be structured, even unintentionally, to increase the value of homes beyond the reach of local incomes,” said the founder of Generation Squeeze. and Paul Kershaw, a professor at the University of British Columbia, said in a press release.

Under current tax policies, all home sales are exempt from capital gains tax as long as the home is the seller’s primary residence. The report argues that these policies essentially turned real estate into a massive tax shelter.

Generation Squeeze believes a surtax would help discourage the use of expensive homes as tax shelters for the wealthy and calm rising home prices. About 13% of homes in Ontario and 21% of homes in British Columbia are worth more than $ 1 million, along with 9% of all homes in the country.

The report estimates that the surtax could generate $ 4.54 billion in annual revenue, or $ 5.83 billion if the tax rate started at 0.5 percent instead of 0.2 percent.

This money could be used to build specially designed housing co-ops and affordable rental housing. The authors also want to see the federal government fund a program that would buy low-density housing units and redevelop them into affordable multi-family developments, also known as “missing” housing.

Generation Squeeze is also proposing that the federal government create a new savings bond that would encourage investors to develop more affordable “go missing” homes.

The report also calls on CMHC and the Canadian Infrastructure Bank to harmonize their mandates and encourage lenders to finance affordable and energy efficient housing. In addition, the report says Statistics Canada should change the way it calculates its Consumer Price Index to better reflect increases in housing costs.

“There are no quick fixes to solving housing affordability,” Kershaw said. “Instead, we need a silver nudge to address the range of policy tools that shape the housing system, starting with the recognition that restoring affordability for all requires that house prices stall so incomes can catch up. “