There have been many good ideas put forth by Castanet readers on ways to combat the housing crisis.
But I am troubled to hear some economists suggest taxing principal residences through a capital gains tax.
Yes, taxing the hard working taxpaying individual, as that has always solved a problem before.
Here are a couple of ideas:
1. With regards to single family homes, there are several large private equity firms, mutual funds and large investors (rich Canadian families) who have targeted single family homes as investments and income streams.
It's estimated 35% of Canadian single-family homes are owned by investors. In June 2021, one corporation(Core Developments) raised more than $1.5 billion and has started buying homes in seven of its eight target markets. It plans to buy more than 4,000 single-family homes by 2026. Once purchased, it will convert the houses to two rental suites and rents them back to the prospective buyers that it priced out of the market. And our government lets them operate this business plan.
It's time our government enacted legislation limiting corporations to owning only 10 houses. Then force these investors and equity firms to liquidate their portfolios. That alone would return tens of thousands of single family homes to the market. In addition, the corporations would have to pay huge amounts in capital gains taxes because these were investments, not homes. The huge tax windfall would finance my second idea.
2. Federal and provincial governments have spent billions trying to provide affordable housing with no positive results, creating low quality rental zones.
Instead of creating affordable rentals, why not build condos, townhouses and single family homes to sell as affordable housing to low-income individuals. Set up resale restrictions through the purchase process and structure the mortgages based on 30% of income.
That could be reviewed every five years, similar to regular mortgages. The property will provide security and we can definitely afford to carry these mortgages because the new owners would be paying the premiums. In addition, the capital gains taxes generated from the sale of the investors portfolios will pay with the building costs.
Imagine a single mother facing 30 years as a tenant, now able to buy her townhouse, live within her income, not be forced to work several low-paying jobs and in 20 years, when she wants to send her children to university, a simple refinance of the equity and school is paid for. By retirement age, the mortgage would be paid in full.
I know these are radical ideas but the same old ideas being pushed by MPs and professional economists haven't worked in the past, and won't work in the future.
Let’s hope our elected officials do something to stop equity firms and investors from using Canadian houses as cold investments, converting potential buyers to life-long tenants, all to the benefit of a wealthy fraction.