Why We Need to Tax Million-Dollar Homeowners

To fight the scourge of unaffordable housing, older and wealthier homeowners must contribute

Paul Kershaw is a professor of policy in the School of Population and Public Health at UBC. He is the founder of Generation Squeeze, a think tank that promotes well-being and equity for Canadians of all ages.

I’m 47 now but I started the “think tank and change” Generation Squeeze when I was 36. Its mandate was to address generational injustice, and one of the first areas I looked at was, unsurprisingly, housing. I entered the Metro Vancouver real estate market in 2004, long before many millennia. I bought a detached single family home for $540,000, and my mortgage is still over $400,000 even though I’ve been paying it off for 18 years. That said, since the purchase, I have earned over a million dollars in equity. My partner and I have been able to do quite a few renovations, and even additional investments, largely thanks to the financial gains we have made from the house. At one point our house had tons of leaks and a shaky foundation, but now it’s quite lovely.

Baby boomers got their start in a better time than me, but I’m still a poster boy for the lottery of good timing, especially when it comes to getting into the housing game. There are so many young people as smart as me – and as hardworking as me – who can no longer join. Some recent research from Generation Squeeze found that it could take Millennials decades longer than it took for the Baby Boomers to afford homes in Canada’s biggest cities. Why the hell do we tolerate this?

One of the best ways to combat this epidemic of unaffordability is to target the country’s fiscal policy. People talk about housing inflation as if it’s bad for everyone, but it makes a lot of homeowners rich and a lot of those gains aren’t subject to tax. In fact, our tax system has housed much of the $3.2 trillion in additional real estate wealth that homeowners have pocketed since 1977. At the same time, young people face home prices that are rapidly outpacing their incomes and are compete for scarce rents with rising rents. .

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Our suggestion is to put a price on housinequality, specifically a modest annual surtax on homes worth more than $1 million. It’s not a totally scary idea; most of us already pay property taxes. What is different in our idea is the progressiveness. For the 12% of Canadians whose primary residence is valued at over $1 million, we are proposing a small tax — a slight cut — starting at 0.2% and peaking at 1% for homes valued at $2 million and up. The owners would pay no tax on the first million. If you own a $1.1 million home, frankly, that’s negligible: you’d be paying $200 a year. It could even be postponed, with a little extra interest, until the house is sold or inherited. We realize that some people are home rich but cash poor, and we want to avoid putting additional financial pressure on these owners. In reality, this surtax would not affect most Canadians.

By our calculations, this tax would bring in about $5 billion a year across Canada, primarily in Ontario and British Columbia, where house prices have been most inflated and, by extension, have generated the most wealth for the owners. And what should the government do with the surtax money? We want it funneled into purpose-built rentals and co-op housing – or “non-profit housing.” Groups like the BC Non-Profit Housing Association or the Cooperative Housing Federation of Canada already have plans on how to increase the number of units adapted to the needs of a person earnings. The City of Vancouver also has a housing plan for different income brackets. These groups have many expertise; what they lack are resources. Our proposal would expand these resources for them, generating revenue that could subsidize developers who work with non-profit housing providers so that betterties are sold at reasonable prices. We areI estimate that our $5 billion idea could fund 150,000 new homes in one election cycle and leverage that amount every year thereafter.

One of the biggest obstacles to progress is Canada’s real estate culture, which encourages many of us to bank on rising house prices to bolster our economies. Our current tax structure only encourages this mentality. The average Canadian is more heavily taxed on his employment income than the owners of a million dollar home on the considerable earnings they make by watching TV. (Even the United States, our closest neighbor, does not protect property gains from tax as much as Canada.) This leads many Canadians to want house prices to rise much faster than incomes, which erodes affordability for future generations.

Our collective addiction to rising house prices also distracts from the generational tension at play in our home.installation system. Take the lazy millet mythannual. If only they worked harder! If only they had fewer cell phones and lattes and cheaper breakfasts! Now contrast this with the myth of the vulnerable elder. This fragility may be real in a biological sense, but according to recent data from Statistics Canada, today’s retirees are among the wealthiest we’ve ever seen, and much of their wealth comes from housing. Nobody says old people didn’t work hard; we’re just saying that hard work doesn’t pay off as much today as when they were young. We ask that the wealthiest members of older demographic groups invest in affordable housing for their children and grandchildren.

I’m a training policy specialist, but for me, housing is no longer just a policy issue in Canada, although our idea is focused on that. What we really have is a great tolerance for generational inequalities. The surtax solution requires the Canadian government to redouble its efforts on intergenerational solidarity and to ensure that housing, taxation and other regulatory measures work for everyone, regardless of age.

Our polling data shows that two-thirds of Canadians support the surtax, but you would be shocked to hear how much resistance I received during my career. I even created a mail folder exclusively for angry notes. What motivates me are the stories I have heard of young people whose future has been jeopardized because the current real estate market is playing against them. I’ve spoken to women in their twenties who want to have babies, but real estate prices are interfering with their ability to start a family. I hear immigrant children say, “My parents sacrificed so much to come to Canada, and I’m not living up to the dream they had of me. All I can tell them is that the game is rigged.

We cannot sustain a housing market that excludes young people, while others get rich sleeping in homes they bought decades ago. Our surcharge can help stop this runaway train. We need all Canadians to decide that housing should be about finding a place to call home more than we want it to be a way to get rich. building financial security by paying off your mortgage over time is a perfectly fine savinvestment strategy. But we shouldn’t accept what is our current housing system enabling: windfall gains over a year that far exceed what a young, decently paid worker can save in a decade. This model only works for one generation.


This article appears in print in the August 2022 issue of Maclean’s magazine. Subscribe to the monthly print magazine here or purchase the issue online here.

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