If you thought housing policy in Canada couldn’t get any worse, think again.
The federal government is considering imposing a capital gains tax on houses worth over $1 million.
This scheme is the dream baby of a group called Generation Squeeze. The federal government called on this group to develop proposals, knowing full well where it stood on the matter.
The idea is that if you own a home worth $1 million or more, and its assessed value goes up year over year, you have to pay tax on the increase.
Now that’s nearly half the homes in central Victoria. Consider an example:
The price of an average single family home in Victoria was $915,300 in December 2020. By December 2021, that price had risen 25.1 per cent, to $1,144,900.
If the new tax scheme goes through, the owner of that average home would owe whatever rate is charged on the quarter-million-dollar price increase.
This is manifestly unfair. First off, you the owner did nothing to generate the change in your home’s value. The market did that, and you don’t control it.
If your house price fell, would the CRA grant you a capital loss to offset investment earnings? I doubt it.
Second, as Generation Squeeze concedes, there’s a huge difference between a family who recently bought a $1.2 million home with a $900,000 mortgage, and a family who bought the home years ago at a price of, say, $200,000.
The first family has an equity of only $300,000. The second has an equity of $1 million.
Yet both would be taxed equally on the entire capital gain.
Generation Squeeze admits this is unfair, but what the hey, brown stuff happens. Here’s their take on it: “We know this isn’t ideal — but we also think [this is] something we have to tolerate for now.”
What they actually should have said is, “this is something you have to tolerate for now.”
In fact, this scheme has been floated before. In his 1993 budget, then B.C. finance minister Glen Clark tabled a property surtax on high-value homes.
Predictably, all hell broke loose and Clark withdrew the plan.
Here’s a better idea. For several decades, starting in the 1950s, the federal government used the Canada Mortgage and Housing Corporation to build and subsidize cheap housing. During those years, Canada was considered to have some of the best housing standards in the world.
But in the late 1980s, Ottawa withdrew funding for public housing projects. This was part of the budget cutting that 30 years of annual deficits brought about.
CMHC was reduced to a shadow of its former self, and remains so to this day.
So restore its mandate to build and finance low-income housing. For this is a national problem, not a purely local one.
Let’s say municipalities in Greater Victoria work with the province to build cheap rental housing. What happens? There’s an influx of eager renters from points far and wide. The housing shortfall in Victoria continues.
With a national approach, funded at least in part by Ottawa, the shortfall is attacked on an equal basis country-wide.
COVID aside, unaffordable housing is our country’s No. 1 torment. It’s time the provinces and Ottawa joined hands to fix it.
