Recently my email inbox, as well as a significant number of calls to my office have raised significant opposition to a proposed annual home equity tax.
The overwhelming feedback on this topic has come somewhat as a surprise to me as this what not a major media story nor have I raised this topic in a weekly report.
Because of the level of responses I have received to this proposed homeowners equity tax will be the focus of this week’s report.
First off – what is it?
Recently a Canadian Mortgage and Housing Corporation (CMHC) funded report from a group known as “Generation Squeeze.” This report recommended an annual home equity tax on residences values in excess of $1 million dollars or more.
The proposed tax would be 0.2 per cent for homes with a value between $1 million up to $1.5 million and would increase again to 0.5 per cent up to $2 million and would ultimately increase to one per cent on homes valued over $2 million payable annually like income taxes.
What if you could not afford to pay the annual home equity tax?
The program would be designed to defer the balance owing with a rate of interest charged on the outstanding balance. The idea being the balance owing would be paid when the home is sold, or title transferred through an inheritance.
How does this make housing more affordable?
In theory the government would use this tax revenue to invest in affordable housing. The report’s author also believes it would create a disincentive for those who invest in housing for a monetary return.
To be candid I oppose this tax proposal. As has already been shared with me, there are citizens who now find themselves living in homes with a value in excess of a million dollars and would be subject to such a tax despite not having purchased a “million dollar home.”
As these individuals point out, they could never afford to purchase a million-dollar home.
On the surface they can sell and cash in on the increase in their home value but as has been pointed out, with the average price of a home in Kelowna now over $1 million, it is pointless as your gains would be wiped out trying to purchase in the current market.
As we have seen large jumps in home values throughout B.C. in recent years, it would be only a matter of time before more and more households qualify to pay this tax regardless of their household income.
It has also been pointed out that selling a million-dollar home in itself negatively can impact your equity as real estate commissions and the BC property purchase tax are much higher on homes with a value in this price range.
As one individual shared with my office, they are only a millionaire homeowner on paper and could not afford to sell and buy another home at the current market rates as it is all relative.
I have heard other reasons why citizens are opposed to this idea.
One common question is what happens in the event that housing markets decline, having a natural effect on reducing your home equity, when at the same time the home equity tax you owe would continue to increase.
There is also a challenge when the value of the home you own does not necessarily accurately reflect your household income and by extension the ability to pay a home equity tax.
From own perspective I don’t believe the government has a revenue problem that requires a home equity tax. The challenge is spending.
As one example, our current Liberal government has invested in the Asian Infrastructure Investment Bank. I believe our shares in this bank should be sold and those funds would be better spent investing here in Canada, building Canadian infrastructure.
Final and important point. The Liberal government has stated that they will not be implementing this home equity tax.
My question this week: Do you support the idea of a home equity tax to fund affordable housing?
Dan Albas is the Member of Parliament for the riding of Central Okanagan Similkameen Nicola and the Shadow Minister for the Environment and Climate Change.
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