With housing market smashing new records, think-tank pitches progressive tax on homes over $1M
CBC
With home prices in Canada's most expensive market going up at a dizzying pace, a Vancouver-based think-tank is proposing a new tax on homes valued at over $1 million to help bridge the affordability gap.
Although Canada's housing market went ice cold when the pandemic began in March 2020, it soon came roaring back and spent much of 2021 on fire. Average prices across the country rose to their highest level on record at more than $720,000 in November, and despite those high prices, the year smashed the annual sales record, too, with more than 630,000 homes changing hands.
The torrid pace has prompted fears of a painful comeuppance if the market goes off the rails, but so far none of the targeted solutions suggested so far — from taxes on vacant homes, flippers and foreign investors to an end to blind bidding — have managed to slow the runaway freight train where they've been tried.
New numbers this week from Canada's two most expensive housing markets, Toronto and Vancouver, show those market pushing further into the stratosphere.
The benchmark price for all types of housing in the GTA hit $1,208,000 last month, up by 31 per cent compared to a year earlier. Vancouver's pace of increase was less torrid at 17 per cent but the overall figure was higher, at $1,230,200, across the region. Both figures are getting close to double the national average.
In both markets, single family homes for under $1 million are becoming unheard of, which is why Vancouver based think-tank Generation Squeeze used that figure as a baseline for an eyebrow-raising proposal this week: a new tax on homes worth $1 million and up.
The group is pitching a progressive tax that would kick in on homes valued at more than $1 million, and get progressively larger on homes valued at $3 million and above. The group proposing it runs out of the University of British Columbia, but received some funding from Canada's federal housing agency the Canada Mortgage and Housing Corporation.
Though the tax would be calculated annually, it would be deferred until the home is sold, so it would function similar to a land transfer tax that many provinces and municipalities already levy.
Paul Kershaw, a professor at the University of British Columbia who is one of the group's founders, says more than 90 per cent of Canadians wouldn't pay a single penny to the tax since it would only apply to those on the very top of the real estate ladder, most of whom are sitting on massive windfalls of currently non-taxable gains.
While policy makers spend a lot of time talking about how they want to crack down on various offshore tax shelters, "we have a home ownership tax shelter that motivates us to bank on rising home prices to gain wealth," he said in an interview. "It's time to protect real shelters and not tax shelters."
Starting at 0.2 per cent on homes valued at $1 million and sliding all the way to more than 1 per cent on homes worth more than $3 million, Kershaw estimates it could bring in roughly $5 billion a year — funds that could be used to support purpose-built rentals and other initiatives designed to discourage speculation. Only the portion of a home's value above a threshold would be taxed at that level, so on a $1.2 million home the tax would apply to $200,000 of the value.
"If you have a $1.2 million home, we're talking about an extra $400 per year, and you wouldn't need to pay until the sale," he said. A $2 million home — enough to rank a homeowner among the top two per cent of the country, in terms of housing wealth, he notes — would accrue a tax of about $3,500 annually.
Even on the highest end, a home worth more than $3 million would see an annual tax of about $13,500. That's roughly the same amount that someone earning $60,000 a year from their salary would pay, Kershaw notes, which is why the proposed tax bill is "a very modest number but larger policy signal," he said.
WATCH | Would-be buyer laments out-of-control prices in Canada's housing market:
P.E.I.'s Public Schools Branch is looking for 50 substitute bus drivers, and it'll be recruiting at three job fairs on Saturday, June 8. The job fairs are located at the Atlantic Superstore in Montague, Royalty Crossing in Charlottetown, and the bus parking lot of Three Oaks Senior High in Summerside. All three run from 9 a.m. until noon. Dave Gillis, the director of transportation and risk management for the Public Schools Branch, said the number of substitute drivers they're hiring isn't unusual. "We are always looking for more. Our drivers tend to have an older demographic," he said.