A study released as property assessments spiked across British Columbia suggests taxing homes worth $1 million and more to combat rising prices.
Dr. Paul Kershaw, a policy professor at the UBC School of Population and Public Health and founder of Generation Squeeze, said current policies, such as the foreign homebuyers’ tax, speculation tax and supply initiatives, are not enough to cool the market.
In Kamloops, single-family homes jumped in assessed value by an average of 27 per cent this year, a trend felt across B.C, with first-time homebuyers finding it increasingly difficult to enter the market.
The study, called Wealth and the Problem of Housing Inequity across Generations: A Solutions Lab, found primary homes are tax shelters that gain value and earn returns without taxation. Kershaw said it has incentivized people to rely on rising home prices to gain wealth. Kershaw said the proposed tax would work similar to a carbon tax.
“We’re saying, ‘Now is the time to also think about imposing a modest price on housing inequity to try and put a downward pressure on the skyrocketing housing prices that we know have landed us in an unaffordability crisis,” he said.
The tax would accumulate annually, payable at the time of sale. Kershaw said the idea is different from capital gains tax in that it targets a small percentage of the top-priced homes across the country.
Kershaw said tax proceeds would go toward investment in affordable, energy-efficient co-operative housing and purpose-built rentals. “Short answer, it would go into more affordable co-op and rental housing,” he said.
His study suggests a small surtax (starting at 0.2 per cent and peaking at one per cent) on homes valued over $1 million.
Canadians, however, have historically relied on their homes as nest eggs for retirement and $1-million homes are no longer mansions. In Vancouver, typical assessed homes are now valued at nearly $2 million.
Kris Sims, B.C. director of the Canadian Taxpayers Federation, said taxing something will not make it more affordable. She said homeowners are unlikely to stomach the tax and would instead tack the cost onto the listing price when selling their home.
“It makes the house cost more expensive,” she said. “Or they would sit on it and not sell, thus reducing the number of homes on the market and reducing the supply.”
Sims said in order to reduce housing prices, supply must go up.
Kamloops-North Thompson MLA Peter Milobar and Coun. Mike O’Reilly agree.
Though it is not currently being mulled by the province, Milobar said he would not support such a proposed provincial tax.
Milobar pointed to densification along the Tranquille Corridor in recent years, including Library Square, as an example of initiatives to increase housing supply. However, he added, projects need to be “sped up.”
Milobar said developers jump through hoops that add time and costs, which trickle down to the community in the price of homes. In addition, the cost of land has skyrocketed, he said.
Single-family homes in Kamloops were in December selling for more than $800,000 on average, which O’Reilly said is “unprecedented.”
He said that, despite homes currently being built in Kamloops, the city continues to fall short of demand. Some big projects, like the City Gardens project downtown, are in the works.
“We have to keep going and promote more development in our city, for housing specifically,” O’Reilly said. “That’s something that we can’t back off the gas on.”
In addition to increasing supply, O’Reilly said record-low interest rates are also contributing to sky-high housing prices.
Milobar said that while the province has created housing for the hard-to-house, there has been a lack of action on making housing more affordable for average families.
Kershaw, however, called it “short-sighted” to focus on supply. He said numerous initiatives are needed to make housing affordable for the next generation.
A newish tax on high-priced homes
All homeowners pay municipal property taxes and school taxes. In 2019, the provincial NDP government introduced the additional school tax, which applies to homes and vacant land values at more than $3 million.
The additional school tax applies to detached homes, stratified condo and townhouse units ad most residential class vacant land. It does not apply to non-stratified rental buildings with four or more housing units, such as apartment buildings.
The additional school tax rate is 0.2 per cent on the residential portion assessed between $3 million and $4 million and 0.4 per cent on the residential portion assessed over $4 million.