Gov­ern­ment is why hous­ing is un­af­ford­able. More taxes won’t help

National Post (National Edition) - - FP COMMENT - JAS­MINE MOUL­TON

The Canada Mort­gage and Hous­ing Cor­po­ra­tion (CMHC) is giv­ing $250,000 to Gen­er­a­tion Squeeze, an ad­vo­cacy or­ga­ni­za­tion for young Cana­di­ans, to re­search ways to im­prove hous­ing af­ford­abil­ity. The group stated it will fo­cus on “wealth gen­er­ated by ris­ing home val­ues,” which in­cited fears the gov­ern­ment is con­sid­er­ing a home eq­uity tax on the cap­i­tal gains gen­er­ated when Cana­di­ans sell their homes.

But more taxes won’t in­crease af­ford­abil­ity. If the gov­ern­ment re­ally wants to know why hous­ing is un­af­ford­able, it could have saved the $250,000 and looked in the mir­ror. Govern­ments at all lev­els drive up the cost of hous­ing in two ways: by re­strict­ing the hous­ing sup­ply and by in­creas­ing hous­ing costs through taxes and fees.

The CMHC de­fines hous­ing as af­ford­able when “it costs less than 30 per cent of a house­hold’s be­fore-tax in­come,” which in­cludes rent or mort­gage (prin­ci­pal and in­ter­est) pay­ments, prop­erty taxes and other home bills.

In Canada’s big cities, the av­er­age mort­gage pay­ment rep­re­sents 44 per cent of home­own­ers’ in­come. Canada’s least-af­ford­able cities in­clude Toronto (where it’s 57 per cent) and Van­cou­ver (69 per cent). In Van­cou­ver, it can take over 31 years for a fam­ily with av­er­age in­come and a 10 per cent sav­ings rate to save for a mort­gage down pay­ment.

The price of hous­ing in­creases when de­mand from pop­u­la­tion growth out­paces sup­ply. Toronto be­came the fastest-grow­ing met­ro­pol­i­tan area in North Amer­ica in 2019, grow­ing by 127,575 peo­ple in a sin­gle year — even though only 102,000 homes were added in the three years since 2016.

In­stead of ad­dress­ing their own reg­u­la­tions that suf­fo­cate sup­ply, govern­ments have in­stead fo­cused on red-herring poli­cies to sup­press de­mand, such as tar­get­ing for­eign buy­ers. On­tario’s non-res­i­dent spec­u­la­tion tax col­lected a mea­gre 156 pay­ments in Toronto in the first quar­ter of 2019, this in a city that ex­pects to grow by 41,000 peo­ple per year. For­eign buy­ers are a drop in the bucket. Van­cou­ver’s for­eign-buyer tax also failed. No won­der. “We’re us­ing de­mand tools to fight sup­ply is­sues,” says Ben­jamin Tal, deputy chief econ­o­mist at CIBC World Mar­kets.

Govern­ments could in­crease sup­ply by act­ing promptly and rea­son­ably on zon­ing mat­ters. In On­tario, re­zon­ing can take up to seven years and there’s cur­rently a lengthy back­log, in­clud­ing 100,000 units held up in Toronto alone. For­mer premier Kath­leen Wynne added to the prob­lem by dis­man­tling the On­tario Mu­nic­i­pal Board that ex­pe­dited de­ci­sion-mak­ing. Premier Doug Ford de­serves credit for On­tario’s Hous­ing Sup­ply Ac­tion Plan, which aims to speed up the process and in­crease den­sity around tran­sit hubs.

Govern­ments also drive up the cost of hous­ing with taxes and fees. The Build­ing In­dus­try and Land As­so­ci­a­tion found that some de­vel­op­ment charges in the Greater Toronto Area had in­creased by up to 878 per cent since 2004. That adds a cost of $164,500 to the av­er­age condo in new high­rise de­vel­op­ments in Toronto.

Taxes also drive up the cost of hous­ing. The av­er­age cost of a de­tached home in Toronto is cur­rently $1.52 mil­lion. Land trans­fer taxes will add nearly $54,000 to the price. Prop­erty taxes will cost another $9,138 this year and more next year.

Renters also need af­ford­able hous­ing. According to RBC, rental va­cancy rates be­low three per cent have his­tor­i­cally caused rents to in­crease. Toronto and Van­cou­ver va­cancy rates are be­low one per cent at the mo­ment and the cities have rental deficits of 9,100 and 3,800 units re­spec­tively.

Rent con­trol dis­cour­ages the de­vel­op­ment of pur­pose-built rentals, which rep­re­sented only six per cent of the 48,000 new rental house­holds de­vel­oped in Toronto from 2011 to 2016. Econ­o­mist As­sar Lind­beck once de­scribed rent con­trol as “the most ef­fi­cient tech­nique presently known to de­stroy a city — ex­cept for bomb­ing.” Govern­ments should in­stead in­cen­tivize the de­vel­op­ment of pur­pose-built rentals by re­duc­ing de­vel­op­ment charges and taxes.

A home eq­uity tax would be but the lat­est ex­am­ple of politi­cians us­ing hous­ing as their per­sonal ATM. Be­fore they can fix the hous­ing af­ford­abil­ity cri­sis, tax­pay­ers need to un­der­stand that gov­ern­ment is the rea­son hous­ing is un­af­ford­able, and more taxes will only make things worse.

Jas­mine Moul­ton is On­tario di­rec­tor of the Cana­dian Tax­pay­ers Fed­er­a­tion.



The av­er­age cost of a de­tached home in Toronto is $1.52 mil­lion and land trans­fer taxes will add nearly $54,000 to the price, Jas­mine Moul­ton writes.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.