An annual progressive surtax on Canadian homes valued at over $1 million could reduce soaring home prices across the country — and could even help end housing inequity.
That’s the conclusion of a new report from Generation Squeeze, a non-profit, non-partisan organization that advocates for younger Canadians.
Owning a home is a good investment strategy, says Generation Squeeze founder Paul Kershaw, a professor at the University of British Columbia, but older people who own homes have more security, while their children are being priced out of the market.
The report, which was released Wednesday, proposes to tax homes worth more than $1 million at a starting rate of 0.2 per cent, which equals about $400 and peaks at one per cent, or about $1,000 a year. The tax would be paid when the home is sold.
Kershaw says the surtax isn’t meant to penalize these homeowners, but to use their wealth to help others own a home.
The report estimates that the government would collect about $5 billion a year, which could be invested in affordable rentals and co-op, and notes that discussions of housing affordability tend to blame foreign investors, money launderers, and speculators.
In their 2021 election platform, the Liberals pledged to increase housing affordability and to boost housing supply, but last month’s fiscal update offered no details on how, exactly, they intend to accomplish that, while a Dec. 20 RBC Economics report warned that housing affordability had reached its “worst level in 31 years.”
“We estimate (that) rising interest rates alone could drive up our national affordability measure another two to 3.5 percentage points over the coming year,” economist Robert Hogue wrote.
“The need for more supply has never been greater. … The outlook for buyers is grim.”
In a year-end interview on CTV’s Question Period, Prime Minister Justin Trudeau said there was “no one silver bullet that’s going to fix housing; we need a range of programs,” adding that his government was working on ways to help young people “buy their first home and start building that equity.”
In his Dec. 16 mandate letter to Housing and Diversity Minister Ahmed Hussen, Trudeau directed him to implement a temporary ban on foreigners buying homes in Canada, and to develop “policies to curb excessive profits in investment properties.”
The Generation Squeeze report recommends:
- Encouraging lending to increase green, co-op, and rental housing, and that Statistics Canada report annually on the influence of monetary policy on the growing gap between home prices and earnings;
- Implementing an annual and progressive surtax on homes valued at over $1 million; and
- Creating a permanent housing-affordability “off ramp” and savings plan to convert low-density housing into permanently affordable rental units.
“If we had acted on these kinds of ideas years ago, we wouldn’t have so many homes out of reach for so many kids,” Kershaw told iPolitics.
“We need home prices to stall so that earning can catch up, and I don’t mean stall for just a short while; I mean stall for quite some time.”