Time to look at taxing property wealth
More affordable housing requires bolder actions, writes Eric Swanson.
The City of Vancouver’s latest round of housing-policy announcements, geared at opening up single, detached zones to a small amount of infill density, quadrupling housing targets for purposebuilt rental homes and piloting a new affordable rental model is welcome news.
The new policies, combined with Canada’s first Empty Homes Tax, proposed shortterm rental regulations and other recent action demonstrate a municipal urgency and willingness to experiment that other communities would be well-advised to emulate.
The stark truth, however, recognized by Mayor Gregor Robertson, is that the vast majority of new supply coming online is nowhere near what anyone would consider affordable.
Benchmark prices for condos, town homes and detached units continue to set new records, approaching $1 million for all housing types across Greater Vancouver. Meanwhile, the average cost to rent a one-bedroom unit just hit a record at $2,090 per month.
Hence, the city’s proposed pilot project in a portion of the Cambie corridor to guarantee that a minimum of 20 per cent of new rental units be permanently affordable for households earning between $30,000 and $80,000 per year. The new units would range from $850-$1,000 for a studio to $1,700-$2,100 for a two-bedroom unit.
Hopefully, the Cambie pilot project will be approved, successful and expanded citywide. But assuming it is, what about the other 80 per cent of renters in those new developments who aren’t lucky enough to get one of those affordable units, and everyone else in the city who hasn’t won out in the housing lottery?
Some have argued the city’s recent announcements, for example the proposed zoning changes to allow more duplexes, laneway suites and infill houses in single, detached zones, don’t go far enough. We agree.
The bottom line: We need bigger and bolder interventions to meaningfully rein in housing costs. Namely, a wholesale rethink of how we tax housing wealth.
Take the example of two couples, both earning $80,000 per year. Couple No. 1 bought a Vancouver home 10 years ago, thanks to a down-payment contribution from a grandparent. Their home sits on a lot that has since been rezoned to allow for an apartment tower, and is consequently now worth more than $10 million.
Couple No. 2, meanwhile, has been renting over the same period. They’ve been trying to save for a down payment, but each year price increases have outpaced their ability to save.
When it comes to paying for things like medical care and other social programs, our tax systems treat these two couples essentially the same, despite the vast differences in wealth and socioeconomic potential.
If we want to sufficiently rein in the cost of new and existing housing supply for the majority of residents, we need to start taxing housing wealth fairly. Windfall real estate profits and affordability are mutually exclusive, whether the person making the windfall is a foreign investor or mom and dad.
A rethink of how we tax housing wealth goes well beyond what cities like Vancouver can do alone.
We need B.C.’s new government to join with the federal government and undergo a comprehensive review of our housing tax system.
The former B.C. Liberal government’s 15 per cent foreign buyers tax, and the current B.C. NDP’s promise to charge an annual two per cent speculation tax are good starting points. But the foreign-buyer tax has been limited both in its scope and effect, and even proponents of the speculation tax make clear it’s unlikely to significantly rein in costs.
B.C.’s new government should immediately work to convene a comprehensive review of options to reduce taxes on things we want more of (e.g. income) by increasing taxes on things we want less of, namely unreasonable increases in real estate values.