Raising a new tax on homes over $1 million could help solve Toronto’s affordability crisis

The relentless surge in house prices in Canada’s largest cities remains, as has been the case for years, a major source of concern among younger generations who do not yet own property and are likely to remain tenants for life if nothing changes.

Proponents have struggled for years and years to influence the way government operates in the housing market, arguing that policy changes are the only way to level the playing field, if only slightly.

So far, it’s mostly been for nothing, despite what politicians may try to promise: Average home prices in Toronto shot up 17.8 percent between 2020 and 2021 alone, reaching a new record high of $1,095,475 late last year.

The sad fact is that incomes in cities like Vancouver and Toronto have not been rising as fast as house prices for decades. Without a much higher-than-average income and significant help from their parents, most people under 40 in Toronto are screwed if they want to own a detached house here any time soon.

Even apartments are becoming increasingly out of reach for most young people in the city.

So we either leave town or rent while people who bought houses in the 1970s (or, in some cases, 2005) became multimillionaires in their sleep.

Complicating matters are the high percentages of foreign ownership and the proliferation of “investment properties,” which help keep inventory levels so low that bidding wars and selling prices far above demand are now the norm in major metropolitan centers.

None of this feels fair because it isn’t, and it sucks, but millennials can at least take some solace in the fact that there are are organizations working hard to create a new generation of homeowners without selling all their non-vital organs (although it’s hard to say whether a kidney could cover even half a deposit these days).

Generation Squeeze, a youth-driven think tank in Vancouver, put forward some interesting ideas this week in a new report called Breaking Canada’s Addiction to High and Rising Home Prices: A Price for Housing Inequality.

“When it comes to housing in Canada, the status quo has led to inequality and complacency. Inequality, as rising house prices lead to wealth windfalls for some, while affecting affordability for others, affecting their chances of realizing their potential. making and enjoying life is limited,” reads the report, written by UBC professor Paul Kershaw.

“Complacency, as some homeowners are reaping the wealth windfalls of skyrocketing prices without acknowledging that their profits are helping many others look in from the outside.”

Kershaw proposes a “creative disruption of the status quo” in the form of proper treatment of housing as a place to live, not just a way to earn money.

“Currently, our tax system protects the $3.2 trillion in additional housing wealth that homeowners have gained from taxation since 1977. It therefore encourages people to prioritize housing as a way to get rich, rather than a place to go home. call,” he wrote.

“Just as offshore tax shelters motivate us to take money out of Canada to preserve assets, the tax shelter motivates us to bank on rising house prices to amass wealth… younger and future generations. It’s time to protect real shelters, no tax shelters.”

house prices in toronto

Graphically via Generation Squeeze’s Breaking Canada’s addiction to high and rising house prices: a report on housing inequality.

Preach, sir! But how (/can?) we as a society bring such a system into reality?

Generation Squeeze says Canada can start on the right track by adding a “modest” surcharge of between 0.2 percent and one percent to seven-figure homes to slow home prices a bit while revenues catch up.

“There’s no reason to fear a million dollar home allowance. A $1.2 million house would owe $400; a $1.5 million house would pay $1,000,” the report reads. was funded by the Canada Mortgage Housing Corporation, a federal crown corporation.

“An extra $400-$1,000 a year is a small price to pay to slow home prices so that the incomes of young people, seniors renting and newcomers can reconnect. It’s also a modest amount when you consider the taxes on wages.”

You can read the entire report and all of its recommendations, along with a lot of insight here, but the main conclusion seems to be that even a small surcharge on the most expensive properties (and property owners) in Canada could help literally hundreds of thousands of people. live a better, more secure life.

Kershaw says: “It’s time to ask the 10 percent who own Canada’s most valuable real estate to tolerate a small price for housing inequality to show allegiance to the Canadian dream that a good home should be within reach.” for what hard work can earn, either in rental or co-op housing, or as owners.”

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