The government doesn’t think your home is a tax shelter, but their hired help does.
Last week, the Twitter pages of the region’s conservatives were exploding, perhaps with better reason than their usual gripes. According to Brian Lilley of Sun News, the rumour is that the Canadian Mortgage and Housing Corporation (CMHC) is looking at implementing an equity tax on homes worth over $1 million at a 0.2% to 1% per year basis.
A Vancouver area non-profit activist organization, Generation Squeeze made the recommendation for equity taxation after the CMHC contracted them to conduct a study and advise them on the issue. The crown corporation’s mission statement is to make housing affordable for all Canadians by the year 2030.
Generation Squeeze is more direct. Founder Dr. Paul Kershaw stated on The Evan Solomon Show that he envisions a tax on equity to apply “downward pressure” on the value of homes over $1 million. This report directly contradicts what the Liberal government has stated its intentions are regarding taxing equity.
Kershaw, it should be noted, is not an economist. He is a professor in the population and public health department at the University of British Columbia. In the same Evan Solomon episode, Kershaw stated that even if a seven-figure home is ‘typical’ in the Greater Toronto Area (GTA) or in the Greater Vancouver area, it still puts the owner in the top ten per cent of homeowners country-wide. He believes they should be taxed as the equity in their homes increases. Kershaw believes that using homes as a form of wealth creation is wrong. He does not like seeing houses being used as assets to subsidize retirement or to create equity (after paying them off or selling them) calling it a “homeownership tax shelter”.
Typical of a university professor, Kershaw takes a pseudo-socialistic approach, not about resource creation but punishment for those who have paid into their homes to own them. He also fails to mention that, as the housing bubble continues to grow, $1 million is close to the average price for a home. According to a Financial Post report, the average Canadian home costs $720,850, which has continued to rise drastically since the housing bubble began in 2002. Kershaw also fails to mention that those ‘elites’ who live in million-dollar homes may have lived in them for decades and allowed the equity to rise over time, rather than being the rich 1 per cent—as is the case for much of the GTA, Ottawa West, or Kanata.
More interestingly, Kershaw fails to make a compelling case on how taxing homeowners’ equity will create any situation where homes become more affordable and he fails to address common sense economics. Levied taxes usually mean higher prices. Gas hasn’t become cheaper since the implementation of the carbon tax; how will houses get more affordable with a value tax?
After contacting the office of the Deputy Prime Minister and Minister of Finance, The Hon. Chrystia Freeland, regarding the CMHC/Generation Squeeze policy recommendations, the minister’s office directed the CMHC to respond to Ottawa Life Magazine and stated via email that: “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.”
They went on to say, “In order to solve Canada’s housing affordability challenges, we need to deepen our understanding of the housing system and any potential unintended consequences on housing affordability. That is why CMHC provides funding to organizations to look at Canada's housing system more closely. There is no requirement for the Government of Canada or CMHC to adopt any of the proposals that may come out in the final reports. The views expressed in the report are those of lab participants and should not be attributed to CMHC nor to the Government of Canada.”
While conservative media may be incorrect in assuming that the government is looking for a way to apply an equity tax to the houses of Canadians, the question remains why did the CHMC hire Generation Squeeze, whose policy platform directly contradicts government policy, especially since this non-profit has been open about its policy proposal of punishing homeowners and equating home ownership to a tax shelter?
The government denied and continues to deny any plan of an equity tax, yet government funds are being used to support activists making policy recommendations.
Governments often flip and flop on issues. While Sun Media may be raising the alarm bell early, for many Canadians this study may serve as a warning that the Liberals and the CMHC are dancing closer to the flame of equity taxes than expected.