CMHC-funded report proposes million-dollar home surtax

CMHC-funded report proposes million-dollar home surtax

Courtesy: Yahoo! Finance

Paying capital gains on a primary residence is arguably the most controversial way to cool Canada's scorching real estate markets.

A new proposal in a Canada Mortgage Housing Corporation (CMHC)-backed report stops short of calling for that but suggests homeowners pay a surtax on properties worth more than a million dollars to help stall rising home prices.

The report by Generation Squeeze, with funding support from the National Housing Strategy's Solutions Labs Program administered by the CMHC, suggests starting at 0.2 per cent of a home's value over $1 million annually and peaking at one per cent for higher-priced homes.

Owners with homes valued between $1 million and $1.5 million would pay 0.2 per cent. The next bracket, up to $2 million, would pay 0.5 per cent. Anything over $2 million owes one per cent.

"If you own a home valued at more than a million bucks, you may be surprised to learn that you live in the 10 per cent most valuable real estate in Canada," said Paul Kershaw, UBC professor and founder of Generation Squeeze.

"You may be especially surprised, if your 'million dollar home' isn't the mansion that some people might imagine goes along with this price tag."

A $1.2 million home would owe $400 a year and a $1.5 million home would pay $1,000 a year. Payment can be deferred until you sell your home, with interest.

"The interest rate would be akin to what provinces already charge seniors who defer property tax payments," said Kershaw.

The report ​​says Canada's tax system shelters $3.2 trillion in added housing wealth homeowners have gained since 1977 from taxation, which it says incentivizes people to view housing as a way to get rich instead of a place to live.

The roughly $5 billion collected annually from the surtax would be used to make new investments in affordable rental and co-ops, or expanded home care, long-term care, and child care.

"It’s time to ask the 10 per cent owning Canada’s highest value real estate to tolerate a small price on housing inequity in order to demonstrate allegiance to the Canadian dream that a good home should be in reach for what hard work can earn, whether in rental or co-op housing, or as owners," said Kershaw

"It's time to protect real shelters, not tax shelters."

The federal Liberal government has promised a number of measures to cool housing, including a foreign buyer ban, making it easier to qualify for a mortgage, help for renters, and a Tax-free First Home Savings Account. More details are expected in the upcoming budget.

 


Rob Gruich
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