The report was sponsored by the Canada Mortgage Housing Corp., a group advocating for intergenerational fairness, and led by Paul Kershaw, a professor at the University of British Columbia. We apologize, but this video didn't load.
You can see other videos from our team by tapping here. The report recommends that a progressive surtax be applied to the value of a home that exceeds the $1 million threshold when you refresh your browser, or Canada can't just tax its way out of its housing conundrum. If a property assessed value is $1.25 million, a 0.5 percent annual surtax will be applied to $250,000, generating $1,250 annually. The surtax rate goes up to one per cent on the amount exceeding $2 million. The surtax is expected to raise $4.5 to $5.8 billion annually, which could be used to fund projects to improve housing affordability. The amount is not deferred until the property is sold, according to the report.
The owner of a home with an average valuation of $1.72 million over 10 years would have to pay $36,000 in surtax at the time of sale, barring interest charges. The deferred amount accumulates to $162,000 for a home with an average value of $3.1 million over a 10 year period. If the owner dies, the accrued tax will be owed by the deceased s state. The report claims that the surtax would affect only nine per cent of Canadian households whose dwelling values are estimated to be more than a million dollars. The report's surtax was recommended by a tax policy workgroup consisting of academics from Alberta and B.C. It is essentially the brainchild of Kershaw. The proposed surtax is going to irk municipalities that are already revenue starved because they are entitled to only 10 cents of each dollar paid in taxes in Canada. The surtax rate would be applied on all properties regardless of location, according to the report. It ignores the differences in property taxes paid by residents of different municipalities. The 2018 article stated that a home valued at $1.25 million in Vancouver would have paid $3,085 in property taxes. A one per cent surtax as recommended in Kershaw's article in 2018 would have added $2,500 to the property tax bill. A similarly valued property in a suburban municipality in the Greater Toronto AreaToronto Area GTA pays more than $10,000 in property taxes, more than three times the tax in Vancouver. These properties would be subject to the same additional surtax, ignoring the glaring difference in base property taxes.
The surtax would disproportionately target those living in detached homes in Toronto and Vancouver. In 2021, 75 per cent of the 54,757 detached dwellings sold in the GTA exceeded the $1 million threshold. It is not hard to imagine that the proposed tax net would catch three out of four detached dwellings in the GTA. The club does not have a sizable presence in less populous provinces, though affordability concerns are no less acute. How would one justify spending taxes raised primarily from detached dwellings in Toronto and Vancouver in other jurisdictions? Canada needs a fresh approach to build desperately needed new homes.
Housing affordability should be a local concern, not just a national concern.
Generation Squeeze is promoting millennials against seniors, or children, against parents, even though they are well meaningd. Their definition of intergenerational fairness implies that we should reduce income taxes on the young and increase wealth and property taxes on seniors. Kershaw's 2018 paper minces no words in drawing the boundary lines between the young and the old, arguing that the cohort retiring today expects more taxation from its children than it paid for its parents generation when the elderly. We do not agree with that. Creating false and unwise binaries in society by pitching one cohort against another is not our definition of fairness. We don't find wisdom in making urban living even more expensive by targeting owners of detached homes in Toronto and Vancouver or depriving municipal governments of the ability to regulate realty taxes.
Family-friendly housing in Toronto and Vancouver is beyond the arbitrary threshold, despite the assumption that $1 million remains a sign of substantial affluence by recent historical standards. Such dwellings are equally likely to be occupied by middle-class families. Any proposal to deflate values of the most significant asset owned by middle-class families will struggle to gain mass acceptance. Murtaza Haider is a professor of real estate management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin. com.