From the speculation and vacancy tax to the foreign buyers tax, B.C.’s current measures designed to improve housing affordability haven’t managed to slow a market that’s often considered a cash cow. Now, a West Coast think tank argues a surtax on equity may be part of the solution.
In a study funded by the Canada Mortgage and Housing Corporation and conducted by Generation Squeeze, the authors collaborated with various stakeholders and found that while many homeowners want prices to stay high, the ability of future generations to afford homes is a common concern.
University professor Paul Kershaw, who heads up the group, said the need for more action to slow housing prices is evident.
“We only need to look at the most recent evaluations from B.C. Assessment to show us the once-again skyrocketing prices of housing in this province,” he told CTV News in an interview.
That makes it tougher for those working hard to get into the market. Generation Squeeze came up with several possible solutions, such as having federal agencies ramp up the building of low-carbon co-operatives and affordable housing. Another idea is to allow mortgage-holders who feel they’re in too deep to sell their property at fair market value to an independent agency, which would then create multiple units. The owners would then be guaranteed a rental spot at 30 per cent of their income.
But the idea garnering the most attention is the one proposing a new tax.
Kershaw said the Price on Housing Equity would target the value above $1 million in the hopes that could slow the market.
“The primary purpose of the Price on Housing Equity is to try and slow down home prices, to just capture the idea that to restore affordability for all, we need home prices to stall so that earnings have a chance to catch up,” he said.
The surtax would be a sliding scale — between 0.2 per cent and one per cent — added to homes valued at more than $1 million, and applying only to the portion above six figures. A $1.2 million property would get dinged $400 a year, and owners could also defer payments until the home is sold.
Kershaw admitted the approach would impact the ability of Canadians to count on housing as their primary retirement investment, and that would take a lot of convincing.
“It’s a cultural issue,” he said. But is it an issue that political leaders are ready to tackle?
Cut red tape instead, critics say
The Canadian Taxpayers Federation was quick to pan the idea.
Federal director Franco Terrazzano told CTV News, “You build homes with hammers, not tax hikes.”
He argued part of the affordability problem is red tape and taxes, which can add thousands of dollars to the construction of a single-family home. Terrazzano said that’s where governments should start, because reducing those fees would lead to more supply.
“Many Canadians rely on the proceeds from the sale of their home to fund their golden years, to fund their retirement, so this would mean a lot of pain for those Canadians,” Terrazzano added.
He noted younger Canadians may also choose to upgrade their homes when expanding their families.
Generation Squeeze said the amount that would be collected with an equity tax, estimated to be in the billions of dollars, could help fund affordable homes. In a press release, CTF claimed that amount of tax revenue “would cover the spending of Prime Minister Justin Trudeau’s government for less than five days.”
Response from governments
CMHC, which funded the study, pointed out neither it nor Ottawa are required to adopt the proposals in the report. Both the Liberals and Conservatives rejected the idea of an equity tax in the last election.
Kershaw believes the tax could be implemented provincially. The study estimates about 21 per cent of homes in B.C. are valued at over $1 million.
The Finance Ministry said the report would need to be studied, but noted the idea of a surtax was similar to the school tax previously implemented by the NDP. “The proposal for a surtax on the highest value homes appears similar to the Additional School Tax implemented in 2018 as part of Homes for BC, our 30-point housing plan. As part of this plan, we increased the annual school tax and the property transfer tax on residential properties worth over $3 million,” the ministry said in a statement.
The province said the tax has raised more than $300 million for affordable housing, and that the government has spent nearly $2.8 billion in affordable housing projects since the housing plan was implemented.
Still, Kershaw believes the issue isn’t about taxes, but how we view homes.
“Do we want housing to be a place to call home? Or do we want it to be a good investment strategy?” he said. “We have been ambivalent or complacent about that question for far too long.”
The provincial budget is due Tuesday, Feb. 22, and it’s unclear whether it could include more measures to help address affordability.
The Finance Ministry’s statement said there is “more to come.”
“We will keep working with municipalities to streamline development processes and get homes built faster, and will be introducing a new cooling off period this spring and looking at other potential measures to ensure prospective buyers are protected in a volatile market,” it said.