Redistribute that house!
If local politicians decided there’s something “wrong” with the prices of winter coats in Montreal, should they remedy the situation by introducing a new tax?
Obviously not. Nor would anyone think it sensible for the government to try controlling the number of hockey sticks sold in Vancouver or whether some Calgarians should or shouldn’t be buying new trucks next year. But then there’s houses. One recent survey by Fortress Developments showed a roughly even split among respondents on the question of whether government should try to control house prices in Toronto, decide how many Toronto houses can be sold, and who can buy them.
Is there something so special about Toronto real estate that it destroys the logic of the marketplace, and makes people yearn for the sector to be government-run?
Toronto Mayor John Tory says he finds it objectionable that homebuyers leave houses empty and, cheered on by the Toronto Star, he thinks a “vacant- home tax” might be the fix.
“We want those properties to be on the market, available for people to own or to rent, because we don’t view housing as just another investment like something in the stock market,” he said this past spring. But people don’t need to justify to the government why they’re using or not using the things they buy legally, nor should they be punished just because the mayor wishes they would use those things differently.
The vacancy taxers insist homes in the city must belong to people who will either rent it out or live in it themselves. But degree of use has never been a criterion for deciding who owns things. People buy cars to drive them, store them, or smash them up in derbies.
Whatever their plans, they still must pay car dealers the market price of the car.
It’s not the place of government to step in afterward and tax underused cars as a way of trying to redistribute them to people who will drive them the most.
But politicians are already getting into governmentrun housing redistribution, with both B.C. and Ontario recently imposing taxes on foreign buyers of real estate aimed at making house purchases more accessible for local residents while making harder for non- citizens to buy houses.
Ontario has now declared its 15- per- cent foreign- buy- ers tax a success because the proportion of homes bought by non- residents in the Greater Golden Horseshoe fell from 4.7 per cent in the month before the tax began to 3.2 per cent after the tax was implemented. So while the Liberals in Ottawa are stoking a trade war because foreigners are taxing our government- subsidized Bombardier planes, Kathleen Wynne’s Liberals in Queen’s Park are congratulating themselves for stopping foreigners from buying our houses.
The message that Wynne and Tory are sending by putting extra taxes on homes that aren’t being used or that are bought by non-residents is that rich people, and especially rich foreigners, are to blame for the economic struggles of everyone else, so we need to punish them.
Of course it’s true that if well- funded foreigners buy lots of houses, prices tend to keep rising, because unlike with consumer goods such as cars, producers can’t simply ramp up supply.
That’s due to the fact the housing market suffers a scarcity problem.
But it’s important to understand where this scarcity problem comes from, since housing affordability is an important policy goal: it isn’t good for any society when people cannot afford a place to live.
The root of the scarcity problem is not rich foreigners. It’s the scarcity-enforcers in the Ontario government and at City Hall. In Toronto, a heavy thicket of red tape impedes new homes from flowing onto the market.
According to the Fraser Institute, “on average, it takes almost 18 months to obtain a building permit in Toronto” and “more than two- thirds of building projects in Toronto required rezoning.”
At the provincial level, Liberals policies like the creation of the Greenbelt in 2005 have reduced the amount of land available for housing. And earlier this year the Liberals expanded rent control, which nearly all economists (and certainly all the good ones) agree is an abomination due to its negative effects on rental supply.
Yet, according to too many politicians, the answer to the high price barriers in housing isn’t rolling back the regulatory policies that constrain new supply.
It’s introducing punitive taxes and price controls.
They should know by now that increased central planning never overcomes problems of scarcity; it can only make things worse.
POLITICIANS ARE ALREADY GETTING INTO GOVERNMENT-RUN HOUSING REDISTRIBUTION.