A report from a group partly funded by Canada Mortgage Housing Corp. (CMHC) is calling for a new tax on homes priced at $1 million or more.
Such a tax would impact virtually every home owner in Metro Vancouver, Victoria and Greater Toronto, where the average composite home price is currently near or in excess of $1 million.
Critics are calling it the first capital gains tax on principal residences, but government sources say that the home equity tax is a non-starter.
Advocacy group Generation Squeeze released the report entitled Housing Wealth and Generational Inequity on January 5, which explored policy incentives to solve Canada’s “housing unaffordability crisis.”
The project received funding under the National Housing Strategy's Solutions Labs Program.
“The Solutions Lab began from the premise that many everyday Canadians are entangled in perpetuating an unsustainable, unaffordable housing system – because public policies incline us to organize our wealth strategies in ways that count on home prices rising faster than earnings,” according to the group’s mission statement.
The report was authored by Dr. Paul Kershaw, founder of Generation Squeeze and a University of B.C. professor in the School of Population and Public Health.
Among the recommendations was the call for a tax that would range from 0.2% for homes valued between $1 million to $1.5 million, and up to 1% on homes valued over $2 million.
The annual tax would be deferrable, meaning the accumulated total would not have to be paid until the home is sold or inherited. According to the report, a home valued at between $1-1.5 million would incur an average annual surtax of $408, while a home valued at over $2 million would average an annual tax payment of $14,710.
This means that after 10 years of ownership the deferred tax could range from more than $4,000 to nearly $150,000.
CMHC has moved to distance itself from the Lab’s tax plan.
A spokesman for CMHC told Western Investor in an email that the housing agency is not committed to proposals from Generation Squeeze.
“There is no requirement for the Government of Canada or CMHC to adopt any of the proposals in the solutions lab’s final report. CMHC is not responsible for the views and proposals included in the lab’s final report,” CMHC said.
“Our government has clearly stated several times that we will not be introducing a tax on the equity of primary residences in Canada. Any suggestion otherwise is false,” said CMHC media official Leonard Catling in releasing a statement from the Ministry of Housing.
The Canadian Taxpayers Foundation (CTF), however, is among groups that are not convinced the government will not bring in a tax on home equity.
“Both the Liberals and Conservatives just spent the last election promising Canadians that they wouldn't hit us with a home equity tax,” said Franco Terrazzano, federal director for the CTF. “Now we find out that the government is using our tax dollars to dream up new ways to tax Canadian homeowners and that’s unacceptable.
“We are not going to tax our way to more homes, you build more homes with hammers, not tax hikes.”