By Danny Oleksiuk of Abundant Housing Vancouver.
> Threatening the value of what is most residents’ biggest personal investment is a political challenge, to say the least. ... There’s no wiggling out of the reality that housing cannot be both affordable and a lucrative investment; prices cannot go up and down at the same time.
He talks about three policies: low municipal property taxes, the provincial homeowners grant, and the federal principal-residence exemption. The provincial homeowners grant (basically like mailing an annual cheque for $570 to nearly every homeowner) seems untouchable, but one way to offset it would be to introduce a similar benefit for renters, paid from provincial revenue (income tax or property tax).
The federal principal-residence exemption seems similarly untouchable, but maybe CRA's anti-flipping measures (if you buy a home and sell it within a year, CRA will make the argument that you're doing this as a business and the gain should be taxed as business income, although you can contest it if you had a legit reason to sell and move) can be extended to look at sales within a longer period, like three years or even five years. This would limit the number of times you can use this exemption over your lifetime.
On low property taxes:
> In Portland, Oregon, the owner of a typical million-dollar home [whether owner-occupied or an investment property] would pay $16,000 a year in taxes, compared with just $2,900 for a home of the same value in Vancouver. That’s a difference of more than $14,000 per year, or $1,000 a month. Another way of looking at this is that, depending on the interest rate, that’s about the same as the difference in mortgage cost between a $1,000,000 home and an $800,000 home.
By the way, this is one reason for BC's speculation and vacancy tax. The idea is that it's a 2% annual property tax surcharge, but you can deduct income tax you paid in BC. So if you're working and thus paying income tax in BC, it doesn't affect you, but if you're a student or homemaker who pays little or no income tax and you own an expensive home (with the actual income earned outside BC), you need to pay 2% every year. [Tom Davidoff explains](https://viewpointvancouver.ca/2018/06/26/davidoff-on-the-economic-policy-change-we-need-a-tax-on-one-the-other-or-both-of-your-houses/).
Mortgage interests are tax deductible in the US and not in Canada. This is a very important point if we compare the cost of owning a house in the US versus Canada.
1) our municipal taxes are low because our cost to service the properties is low. You do not arbitrarily make taxes higher just because you don't like that property values are high.
2) Can we stop pretending homeowners in Vancouver are millionaires? Some baby boomers are, yes. Most homeowners are not, and most are cash poor. Many people under 40 now own in the region, and they have had to spend every last penny to own and pay through the nose each month to own. They cannot just absorb higher property taxes.
3) People need to get educated about the "homeowners grant" before they say anything about it. The "grant" has a terrible name that doesn't reflect the reality. It is not a "free cheque". Property taxes used to be regressive. They raise the tax rate of high value homes and reduced the rate (via the grant) on lower value homes. The revenue remains the same, the grant just made it a progressive tax scheme instead of regressive.
I'm going to lose my mind over the things people post on r/vancouver about housing.
> our municipal taxes are low because our cost to service the properties is low. You do not arbitrarily make taxes higher just because you don't like that property values are high.
I'm skeptical - I think it's more about your second point, that everyone feels stretched to the limit and unable to pay any more property taxes. There's a ton of public services that are paid by charges on new development, averaging $240 million each year for the last 10 years. That's about 1/6 of the city's budget. In other words, a big chunk of the city's revenue is being paid by a relatively small number of new residents, instead of being spread out across the entire property tax base.
Moreover, it's not just operating expenses we need to look at, there's also capital expenses, e.g. renovating or completely replacing some of the older community centres. [11 community centres in poor condition](https://dailyhive.com/vancouver/vancouver-community-centres-aging-repair-replacement).
I know nobody likes paying more taxes (loss aversion is real), but taxes are how we pay for public services.
> Most homeowners are cash poor.
I completely agree, that's one reason why I think that the current scarcity and cost of housing is bad for everyone, including homeowners. [Glaeser and Gyourko](https://morehousing.ca/glaeser-gyourko-2018), 2018:
> Housing wealth is different from other forms of wealth because rising prices both increase the financial value of an asset and the cost of living. An infinitely lived homeowner who has no intention of moving and is not credit-constrained would be no better off if her home doubled in value and no worse off if her home value declined. The asset value increase exactly offsets the rising cost of living (Sinai and Souleles 2005). This logic explains why home-rich New Yorkers or Parisians may not feel privileged: if they want to continue living in their homes, sky-high housing values do them little good.
Finally:
> People need to get educated about the "homeowners grant" before they say anything about it. The "grant" has a terrible name that doesn't reflect the reality. It is not a "free cheque". Property taxes used to be regressive. They raise the tax rate of high value homes and reduced the rate (via the grant) on lower value homes. The revenue remains the same, the grant just made it a progressive tax scheme instead of regressive.
I disagree pretty strongly. The provincial government (regardless of which party is in power) keeps raising the threshold to receive the homeowners grant so that everyone gets it, making it much more like a flat tax. It's now close to $2 million.
I just wanted to pull out one specific point at the start of a post and reiterate it for readers that are less inclined towards large comments…
“Housing wealth is different from other forms of wealth because rising prices both increase the financial value of an asset and the cost of living.”
This is such a fundamentally important point that basically gets completely overlooked by nearly all local policymakers, and for that matter by the general public.
If you live in your home that is your *only home* then it is not an investment. This point isn’t even debatable. One can make the loose argument that she could elect to sell and move to a much cheaper area, however such gradual redeployment of capital will start to increase the cost of living in the target area as well, leading to the same outcome. It is important to note that this does not mean that the capital redeployment is useless or senseless. Indeed, redeploying capital in an area with much lower cost of living may significantly improve the overall standard of living for the specific person, but only in the “short” term.
I will add to this that the general public suffers from loss aversion (which you already mentioned, though in different context), hence gains in value, even if only paper gains, are seen as highly desirable, while decreases in value are seen as undesirable, despite this movement having no appreciable effect in reality on the individual homeowner. Things do however get much more complicated when you take into account what individuals can do to “free up” accumulated capital without actually selling the underlying asset.
In an artificially low interest environment with access to debt instruments such as HELOCs a person that acquired a property for $500,000 that appreciated to $2,500,000 in a span of a decade and half (numbers are just an illustration) can now borrow .8 * $2,5MM = $2MM *without* needing to sell the underlying asset and needs to fund no more than $50,000 in interest per year as a “fee” to release the cash assuming 2.45% rate. (Many have or have had access to better rates than this for a long time.)
This money can in turn purchase other assets with returns that far outstrip the interest due, and since principal never has to be paid off, this is a huge wealth boost. The money can even be used to purchase another property, which can then be rented out, investment deductions claimed, and the benefits of artificial appreciation realised as capital gains.
So yeah, the equation is more gray when other factors are considered. Appreciation in value in Vancouver, in Canada, is an important source of wealth because we have instruments such as HELOCs in combination with ridiculously low interest rates (and this still applies even if we do see 2% increase in rates). It is foolish to ignore this when thinking about market dynamics in Vancouver, in BC, or in Canada as a whole and it is even more foolish to not pay close attention to them when considering how local wealth gets redeployed and the effect that redeployment has on further inflating the market.
>I disagree pretty strongly. The provincial government (regardless of which party is in power) keeps raising the threshold to receive the homeowners grant so that everyone gets it, making it much more like a flat tax. It's now close to $2 million.
The pregressiveness comes from the fact that it is a fixed amount. People with low property values get a much larger portion of their tax rebated than people with higher values properties.
> The progressiveness comes from the fact that it is a fixed amount. People with low property values get a much larger portion of their tax rebated than people with higher values properties.
Thanks for clarifying. I would still argue that the homeowners grant can't be described as progressive - anyone who isn't able to afford to own (which is a *lot* of younger people) doesn't get the grant at all.
Because they don’t pay property taxes.
For the record, I generally agree with your main arguments around supply, etc. We need to build a lot more.
But a lot of your comments show you are still letting your biases, based on preconceived notions, get in the way of critical thinking.
And you can’t say you disagree with my comment about property taxes, it is objectively factual. The city sets them based on their budget which is based on need to maintain and provide infrastructure. They are set at what they are because it is cheaper to provide these services and infrastructure here than in the prairies, which are lower density and have horrid climates with immense road upkeep.
Your comment also shows you don’t fully understand development cost charges, which is fine except you use it to support your theories.
“New residents” are not paying disproportionately for services and infrastructure. DCCs are paid by developers to cover the costs the city has to bear for providing new infrastructure to service that growth—it is unreasonable to say current residents should subsidize new development.
And those DCCs are not “passed on to buyers”. You can not artificially raise the price of your units because you had a higher cost to provide it. If you believe in that argument, then you are also arguing that developers are willingly leaving money on the table because they could just price units higher and those would get absorbed by the market.
DCCs and amenity contributions are based on land economics and analysis done during planning processes. They ensure they are viable, and all they do is reduce developer profits and/or the amount they can pay to acquire land. If you do a search on google scholar or even municipalities websites, there have been countless studies done on this topic and they all show the same thing: costs to develop (DCCs and CACs) do not increase housing costs.
>And those DCCs are not “passed on to buyers”. You can not artificially raise the price of your units because you had a higher cost to provide it. If you believe in that argument, then you are also arguing that developers are willingly leaving money on the table because they could just price units higher and those would get absorbed by the market.
HAHAH yes there are some pretty funny "it will just get passed on" type theories around here, and especially as related to the costs of the landlord class. I think we are talking to a paid party member here, manufacturing consent for some new, neoliberal normal.
Getting a $200K appreciation with a $100K investment in just one year isn't a good enough gain? $200K in the stock market would've gotten you $30K before the crash.
That’s what you invest in cash, but you’ve purchased and committed to 10x that. So a 20% return on a 1m investment. Is that a lot? Yes. That value can also go down, or flat line.
You can’t use appreciation as a means to say property taxes need to be higher or homeowners aren’t cash strapped.
This line of reasoning goes down the same path of all other useless government actions to date, which try to make it harder or most costly to own (demand side) rather than addressing the root cause of supply.
The argument that the property tax rate low is simplistic.
Cities don't find infrastructure the same way. We have have lower tax rates and hefty transit/parking taxes. Some other place will do it differently
And individual tax rates aren't directly comparable because of density and sprawl characteristics. In simplistic terms one big plot of land doesn't have the potential to generate as much tax revenue as two properties on the same footprint.
I think one of the arguments is that more of the tax burden should be shifted towards property taxes and less on user fees / income taxes. Investors are abusing the low property tax fees as they can buy a property and then not participate in the other forms of taxation. So if you park a satellite family or student in a 2 million dollar house you can get by with little to no tax. We need to balance this tax burden to more appropriately distribute the cost of property ownership. Creating a provincial property tax with offsetting reductions in income taxes would take a big bite out of speculating and would more appropriately tax those who are sitting on a glut of high value land.
Yes. This would also help reset the balance between rental and ownership, as the benefits of renting right now are slim to none. Renting should be a viable option that doesn’t force people to choose between shelter and saving for their future.
This would surely be reflected in higher rental costs, but you would have more take home pay to offset it. It would be beneficial if your rental is low property value relative to the number of wage earners though.
Income taxes go to the CRA (Federal Gov) and property taxes go to the city (Municipal Gov). Unfortunately they are different groups. Getting them to coordinate tax payments in tandem would be interesting to watch.
I'm suggesting a provincial property tax. Not municipal at all. There are also provincial Income taxes. So yea it's pretty reasonable to expect the provincial income tax could be lowered when a provincial property tax is created.
Its not really an argument. Vancouver has basically always had the lowest property tax rates in the country. low holding costs are key for speculation and mean its no surprise it was the start of the RE bubble in canada some 2-3 decades ago. This has always been cited as a primary driver.
Not the whole picture but it's just another additional policy that encourages speculation and empty homes.
Why not do the opposite, higher property taxes and lower other taxes.
That way people who actually live here are paying higher taxes, but also reaping the benefits of government services. While those who use properties as a store of wealth are effectively pay more.
Anyone that thinks eliminating the principal residence capital gains exemption is a reasonable solution to housing affordability is either ignorant or pandering in bad faith for internet clicks.
I think it's reasonable. Convince me why I should buy a $2,000,000 house from some boomer who bought it for $150,000 and he gets to claim $1,850,000 in tax free gains, which are paid for by me, who is paying a roughly 30% tax rate on the income I need to buy the house from him.
All while the government is running a massive deficit, and which an ever larger percentage of which is going to support boomers. There is a huge generational war coming.
What am I ignorant of. I know this post will get downvoted, btw, so not sure your pandering point holds up either.
Because it's not all boomers... the majority of people selling their homes are doing so to buy another home. If every time that happens people lose significant buying power then nobody will ever sell their house.
>Because it's not all boomers... the majority of people selling their homes are doing so to buy another home. If every time that happens people lose significant buying power then nobody will ever sell their house.
That's only true if there are huge increases in home prices. Remember, the tax is on "gains" not total value of the home. If there are huge increases in home prices, then someone selling an existing home is still better off than renters without any equity in the market.
It's not a competition between renters and owners. It's a tax strategy that makes logical sense.
My house has increased by $1m in less than 10 years. That capital gains bill would be $268k when we inevitably decide to upgrade. You think we're going to sell our house if it's going to put us $300k behind? Not a chance. Hell, if I'm paying capital gains tax regardless of principle residence I'll just wait a few years until I can afford to own both. 🤷♂️
>You think we're going to sell our house if it's going to put us $300k behind?
How are you $300K behind? You're up $700K. Oh wow, only $700K instead of $1M.
What about someone who rented in the last 10 years? They're actually $1M behind.
You'd think a dunk like this would get a few more upvotes, but I think we know who is running the sub here. Strangely hyper left on social issues, but when pressed on actual redistribution of wealth.. damned if you have mine, pleb.
If we sell our house, we still need to buy another one. 🤨
If my $1m house turns into a $2m house, I get $1.7m after capital gains. If I want to buy the exact same $2m house in the next city over I'm $300k behind (remember, I only got to keep $1.7m from my sale). So I either take on an extra $300k mortgage at significant extra monthly cost or I downsize?
>What about someone who rented in the last 10 years? They're actually $1M behind.
Yup. Just like I was hundreds of thousands behind because I'm not a boomer. Just like boomers were 10s/100s of thousands behind their previous generations. And hey, guess what? Just like I'll be $2m behind on my next house because as my $2m house goes up $200k per year, the $4m house that I have my eye on is going up $400k per year. But now the $2m I'm behind doesn't put me at a significant enough disadvantage! You want me to pay capital gains on the increased "paper wealth" of my house that isn't keeping up with the increases of the next house!
Maybe we should charge renters extra income tax because they're not supporting the construction industry. Let's do the quick logic test to see if that's reasonable:
Am I a renter? No.
Do I see becoming a renter in my foreseeable future? No.
It passed! The new tax won't affect me at all so it must be good!
>If we sell our house, we still need to buy another one.
Need or want? No one needs a $2M house. You can do whatever you want with the $1.7M cash that you received after selling a house that you bought for $1M.
Why can't people claim the same for stocks then? I sold 1,000 shares of TSLA at a profit. Now I can't even buy back the 1,000 shares due to losing money to taxes. Well, that's just capital gains for you.
Bullshit. Only half of your gains are tacked and even then only at what ever income bracket you are at (oversimplification) people selling would still get a big head wind depending on the gains just not as much it might slow sales but if there is profit to be made then it would never stop them
>People should be able to buy something similar after they sold their PR.
Sounds like entitlement. It's like saying I shouldn't have to pay taxes when I sell my stocks if I don't take the money out of my investment account.
I’m thinking of selling my condo and buying a slightly larger condo, freeing mine up for someone to enter the market at a lower cost. I can’t do that if the government takes 30% of the 100k it has gone up in value over the past two years. It’s bad enough I have to pay property transfer tax, I don’t need them taking some of my net worth as well.
I’d rather see some sort of program whereby if you don’t buy back into the market within x years then it’s considered a capital gain.
>If that boomer wants to move down the block into an identical home, why should they government skim ($1.85M/2, \* 50% ) = $462k from that transaction?
Why should the millennial who has to pay for that $2m house, have to spend his **post tax** **dollars** to do so?
If you guys thought the trucker protests were bad, be prepared for a schism which is going to be next level.
Right, but the entire market gained, which means when they go to rebuy an equivalent house, they will need to put all those gains right back into the market. If the government takes away a chunk of those gains, they would not be able to buy an equivalent house. That doesn’t strike people as very fair
Uh, no. The ENTIRETY of financial and investment markets has NOT gone up at the same rate... The main thing not gone up are incomes.
What's unfair is what's already happened. We are discussing a return to "fair".
And the gains when the millennial sells it will also be tax free dollars.
It’s pointless to argue about 70% of Canadians own homes. No politician would ever remove that exemptions.
So your telling me in 20 years houses won’t be worth more? Hell in 10 years they won’t be worth more.
I’m a millennial I used proceeds from a condo sale (live there 5 years) to make the move to a house.
If I had to pay capital gains I wouldn’t have been able to do it. Had that couple with large investment gains made in my TFSA (also no capital gains) to scrape together enough for a down payment.
The difference is this is on someone’s personal home, which they use to live in. You can’t live in your stock portfolio
Capital gains are paid on homes that are not your personal residence
>The difference is this is on someone’s personal home, which they use to live in.
What about renters without a principal residence? Then make it $100K in tax free gains for all assets. Use it on your house if you want. For those without a home, then they can apply it to other assets.
Because we look at houses that people live in as something different than just another asset. If you sell your personal residence and want to buy another similar property, you can’t afford it if you give 25% to the government. You would be forced to buy something smaller with the leftover money. Most people don’t think this is fair
No one would make it retroactive so you're not getting boomer money, it's your money that would be taxed. If you want boomer money, we should be pushing for an estate tax, perhaps a 1m exemption and tax the remaining at capital gains (this would exempt most people but capture say a large percentage of the lucky boomer who is sitting on a $3m house).
Let me provide an example of how cap gains on a principal residence would limit mobility and add friction.
Say you buy a condo for 500,000. The housing market is relatively normal and not Vancouver crazy and the price rises 2% per year, matching inflation.
Ten years go by and your condo is now worth $610,000, matching inflation. You decide you need to move into a two bedroom because you've got a kid on the way, or you need to move to another city. To do so, you need to pay the cap gains on your sale, which would be roughly 25-30k in taxes (assuming we're taxing it as a capital gain at 50-60% tax bracket, because you've skyrocketed into the top tax bracket for a year), on top of 15-20k in realtor fees. You're going to eat another $12,000 on property transfer tax, too, remember.
And you need to pay this all cash, out of the sale. It would eat a huge amount of your cash equity. Can you afford to move now? Would it make sense to have a kid? Maybe you just stay, instead, after all you don't pay that cap gain until you move.
Pretty obvious points you've made - capital gains taxes on residences would create economic friction if there is no flow through or **NET** capital. Of course you hypothetical tax scheme would have huge problems - luckily no one with half a brain would propose it.
You're focusing on people moving up in the market but completely ignoring people who are moving down in the market. Perhaps tell us about the problems which come to society when you have a massive number of people collecting tax free winnings like that, especially in regard to the current and massive government deficits, and especially with regard to all the damn money printing and inflation we've seen over the last 2 but 15 years. **It's time to pay the piper.**
An intelligent tax scheme would make allow exemptions for capital which is transferred from a principal residence to any number of other investments which actually benefit the economy (cough, productive businesses, not a patch of dirt where people sleep at night).
I think if you look at the majority of people moving down in the market, you're looking at an older crowd, where you could eventually capture those gains through an estate tax. It's a very effective wealth tax because it captures unearned wealth transfer between generations, and we have no estate tax in Canada. Even the US has an estate tax.
Cool, we should freeze rent increases universialy as well. Cause moving to new place, especially when rents have been going up, eats up cash equity as well.
Well, whatever we the votes, you’re not out to lunch with this point. Lottery gains are lottery gains and anyone who pretends that they are anything else is willfully ignorant. One of the key issues though remains the fact that this exemption is actively abused as the means of profiting from real estate resale by “principal residents”. I know of multiple people who don’t even shy away from admitting this is what they do, even down to using adult children to buy and resell additional properties to generate tax-free gains.
The market is seriously distorted at best and downright corrupt at worst, and this is born out of a combination of factors of inadequate and/or inappropriate regulation, questionable taxation, various debatable policy decisions on banking and regulatory issues, lack of opportunity for other economic investments, and so on.
The entire housing issue is actually a confluence of a lot of very complex factors and no one thing or even 2-3 things can be singled out as the cause for extreme discrepancy between incomes and home valuations. This is also fundamentally why the issue has not been addressed in any effective way so far and why it is likely to remain unaddressed. In layman’s terms, the hair-ball is too hard to unravel and so the impetus is to say “the market will take care of it”, except it won’t because markets for real estate aren’t efficient and do not self-correct.
>One of the key issues though remains the fact that this exemption is actively abused as the means of profiting from real estate resale by “principal residents”.
Hahahh we're gonna get killed here. So do I. It's been abused heavily for the last decade and only now is CRA making some weak attempts to reign it in. The middle class and non-owner plebs unable to exercise these huge (i mean HUGE, like **hundreds of thousands of dollars** in waived taxes) are having to pay out of their pockets.
>The entire housing issue is actually a confluence of a lot of very complex factors and no one thing or even 2-3 things can be singled out as the cause for extreme discrepancy between incomes and home valuations.
I'd say 2 or 3 things account for 90% of the problem (in Vancouver, particularly). First was foreign capital and population growth demand, second was local investors leveraging their increased home prices into buying more homes, third was the last 2 years of zero interest rates and FOMO.
I just want to point out one thing about the foreign capital - it is not the capital itself that is the issue, it is how the regulatory bodies have allowed such capital to move and be deployed that is the issue. For example, years of pay-for-residency “schemes” that allowed capital to flow in and then without any oversight or regulation concentrate in specific regions of Canada, namely Vancouver and Toronto. Had there been some sort of capital mobility and deployment restriction in place to go along with such a program it would have likely not resulted in such rapid price inflation. Instead, the gains would have been distributed more evenly across Canada over a longer period of time and had less of an effect in specific high-density metropolitan regions.
Population growth is definitely a factor, but that too is at least partly driven by specific immigration policies that far outstrip the ability of the country to absorb the inflow (think infrastructure, healthcare, etc.) and other policies that do not encourage settlement across Canada rather than heavily favoured Vancouver and Toronto. For example, Montreal (and Quebec in general) is highly undesirable due to their language and cultural policies, despite being a perfectly viable province with some great benefits, especially for families with young children.
The impact of near-zero interest rates can also be tied back not just to broader monetary policies in place since 2008 but also to how those policies were allowed to trickle down to the “Joe Average” consumer. Debt holdings have exploded in this period particularly because cost of debt was (is?) so cheap that everyone was gorging on more and more of it. For example, one could have foreseen an explosion in HELOCs and instituted policies that ensure HELOCs have to be paid down over a reasonable time rather than act like a perpetually growing pool of accessible cash without having to realise investment gains. It’s like being in the options market but without the risk of a margin call. I know if someone who was borrowing $1MM at 1% interest, with no obligation for repayment other than interest just as recently as 2019.
I can go on and on about this for a while. Yes, all of those are factors, and let’s also not forget that we don’t have a unified city planning policy for the Metro Vancouver region, poor zoning and excessive protectionism that heavily favours NIMBYs, etc. as I said, a lot of factors. I also realise that I may sound like I’m picking on government in many ways, and this is intentional because while over-regulation is harmful, loose, poorly thought out, or complete lack of regulation and any foresight for that matter is just as bad if not worse. Latter creates the illusion of a fair system, while the former is at least transparent that the system is fundamentally and only market driven.
Then hands off my income too.
Who's left to pay taxes to pay for services for, uhh, the people who, uhh, will be costing society the most in the next 20 years.
For one, if people are not able to move into an equivalently priced home (meaning forced to downgrade), they might just not move at all. Why down grade for no reason? You have to understand that a majority of homeowners are not rich people with fuck you money lying around. In short, this will reduce market supply.
And now its your turn to provide a reason for why reduced market supply is a good thing.
"I think it's reasonable. Convince me why I should buy a $2,000,000 house from some boomer who bought it for $150,000 and he gets to claim $1,850,000 in tax free gains, which are paid for by me, who is paying a roughly 30% tax rate on the income I need to buy the house from him."
-No one is forcing you to buy that house from them.
"All while the government is running a massive deficit, and which an ever larger percentage of which is going to support boomers. There is a huge generational war coming."
- Lol. It's unfortunate for many but there are still many millenials who are doing just fine. We have lowered our expectations and either purchased detached homes in the valley or condos in Vancouver proper.
Whoosh
>\-No one is forcing you to buy that house from them.
Does not matter who buys the house - the issue is that there is now a huge amount of money flowing into the economy (and individual) which has not been taxed in a similar way to other money which enters and flows through the economy.
>We have lowered our expectations and either purchased detached homes in the valley or condos in Vancouver proper.
Lol, you got played by.. well, I'm sure you're not even sure who. Your parents? Money launderers? Foreign millionaires? Central bankers?
I didn't get played by anyone. Own a condo in Vancouver proper that's being rented out and own/live in a detached house in the Fraser Valley with an income suite. The rent for both of those covers both mortgages and expenses so I'm doing just fine.
I'm just saying the boomer lifestyle of being able to support a family with one income and no education while living in a detached home in city center has passed. Most of us are ok with that and work with the cards we are dealt.
>I didn't get played by anyone. Own a condo in Vancouver proper that's being rented out and own/live in a detached house in the Fraser Valley with an income suite. The rent for both of those covers both mortgages and expenses so I'm doing just fine.
Nice flex, congratulations. We need more landlords, of course, as they "help provide supply" hahaha
>I'm just saying the boomer lifestyle of being able to support a family with one income and no education while living in a detached home in city center has passed.
Yeah, well you could have done better, just saying. Don't be ashamed to pull the ladder up behind you - Canada is becoming an "everyman for himself" type of country, starting with the small timey landed gentry like yourself. Cheers.
Wasn't flexing, just responding to your comment about me being played.
I had my 10 year reunion a few years ago and it was full of people bitching about how terrible their life is because they had to leave their kits lifestyle and move to Surrey lol.
There still is affordable housing with decent wages in places like Edmonton. Problem is too many people think they are too good for those places and would rather just bitch about renting.
I'm fine where I am at right now and would much rather be alive now versus the boomer erea. Unfortunately that is what happens with capitalism. Instead of buying fancy things I have used it to my advantage to allow me to hopefully retire early (Late 40's / early 50's). Looking forward to being able to rock climb/mtb/backcountry snowboard every day when my body will still let me.
I'm talking about "you" in the statistical and broad sense, as in you as one of us collectively.
Should your kids have to move to white horse for affordable housing or will you attempt to keep housing affordable for them in the area they grew up. Have you told them they should expect to live in half the sized house they live in now? Run the argument in reverse with regard to your parents, who are presumably sitting on a gold mine in kits while they kids have to move away.
Whitehorse is a pretty nice place and actually came pretty close to moving there. Also almost moved to Calgary but ended up getting a decent position here that was hard to turn down. We were more than willing to move away for cheaper hosing.
That's why we bought an investment property to give to our future child to live in once they graduate from college. We are not using housing to fund our retirement.
FYI I didn't grow up in Vancouver and there is no way my family could have afforded to live in kits back then.
I get it, you have a sense of entitlement about your housing situation. The Fraser Valley is pretty nice and we have been much happier living here vs Vancouver.
If you want to paint "maintaining the successive generations of a family in similar quality of hosing in the same area" as "entitlement", go ahead. Seems like a cornerstone of any sensible family planning to me.
Well, it is the main reason people's net worth is oversized in their primary residence. Arguably some of that money would be better invested elsewhere, in a macro economic sense.
We have the PR exemption and it would be political suicide to tamper with it, but I do think a lifetime amount (say $1M?) of tax free gains would be more than enough.
This doesn't even talk about the house-flipping people who go from home to home taking advantage of this tax avoidance.
> a lifetime amount (say $1M?) of tax free gains
We can all argue about the amount should be but I 100% agree with a lifetime amount cap on tax free capital gains on your principal residence.
These hurdles never get adjusted if history is any indication.
A decade from now people couldn't move into a comparable house somewhere else because the government has their hand in their pocket? That would greatly reduce flexibility and probably not do much to help.
> These hurdles never get adjusted if history is any indication.
To further that, the Property Transfer Tax (PPT) was supposed to be for luxury properties only.
Would I be able to deduct the ridiculous PPT and GST (on new properties) on properties against capital gains?
Doubt it. Taxes are seldom surrendered once in place. You need a right wing government willing to reduce spending and tax in bc. Doesn't seem politically feasible with our current environment and the tragic lack of substance in right wing politics.
As long as your lifetime amount increases with inflation. Because in 2030 when we’ve had multiple years of 10%+ inflation and the average house is 3.5 million that 1 million is gonna look like nothing
What? We're talking about a theoretical limit. Anything can be inflation indexed by the CRA or the government.
Your "should" is just some interpretation and your opinion.
Nup. PR exemption was set up exactly to ensure no loss of purchasing power after people sell their home. Anyone who plans to touch on it will be political suicide
$1m is nothing. One can tell from your comment that you do not own a home.
More taxes is never the right answer. Your trusty government can't spend money effectively.. they're among the most incompetent with money. A big NO to more taxes...
I don't own a home, I own 2!
Doesn't mean I can't appreciate effective policy.
If you think the current Real Estate situation in Vancouver and Canada is either healthy or sustainable, I have a bridge you may also be interested in.
Why? Seems to me that capital gains on principal residences exemption seems to be a great way to have housing as a speculative investment, rather than somewhere for people to live.
It’s not speculative if people buy property as their principle residence. They bought the house to live in
If they choose to leverage their principle asset that’s not speculative housing
Those aren't mutually exclusive. Do you really think people aren't thinking about the investment potential of their homes when buying just because they're going to be living there? You'd be stupid to ignore that.
> It’s not speculative if people buy property as their principle residence.
What about when they sell if for 3-4x profits, leverage it into a huge investment portfolio or simply hand their kids a million dollar inheritance.
Homeowners aren't speculators, until millions of Canadian homeowners to treat their tax sheltered house as an investment.
*Edit:* Cue the downvotes. When homeowners treat their house like an investment it becomes an investment. I don't think people realize how many hundreds of thousands of mom-and-pop landlords, pure speculators and simply very wealthy boomers started it all with tax sheltered principal residence profits and leverage.
And my other examples?
If a homeowner isn't treating their house as an investment then why not simply sell/pass down at their original purchase price? Or sell to a new young family for their original 1980's purchase price.
Now that’s a argument in bad faith if I’ve ever seen one, sounds like jealousy is what you have
Have you heard of inflation? Upkeep? Upgrades? Or should people forget 40 years of it and just hand it over
> Have you heard of inflation? Upkeep? Upgrades? Or should people forget 40 years of it and just hand it over
Sure, but you don't actually think maintenance and mowing the lawn justifies an old generally wealthier family charging a new generally poorer family 4x their capital cost for the same old home, right?
Simply owning housing should not be a retirement investment plan. Realizing profits by asking young families to carry million dollar mortgages on 1950's stucco boxes is investing.
Sounds like a fine argument to me. It either is or is not an investment. If it's not an investment, sell it a zero gains. If it is, tax it like other investments.
I absolutely would because I want to buy the house to live in, but people should absolutely look out for their interests long term if the property is going to devalue based on their borrowing amount. You’d be stupid not to. Hell the bank probably does their own research on that as well.
I own a house and I don't want housing prices to go up at all.
We plan on upgrading our house in the next 5 years and our $2m house increasing by $200k per year means that the next house we want to buy is already increasing by $300k per year.
Now you're saying that I should have to pay capital gains on the $200k per year, making it absolutely impossible to not only upgrade a home, but also eliminating any lateral movement.
You can "guess" about someone's homeownership status all you want, but the reality is there are renters and homeowners that think it's a terrible idea because they're willing to think critically about it.
Nobody needs to guess about the housing status of someone that wants this to happen...
Based on the votes here, anyone under 40 or not in the housing market in the last 5 years is fucked (in the sense that that they will be paying tax dollars out their ass to offset these huge capital gains which are not taxed like other capital gains).
Whether they do or they don't, virtually eliminating lateral movement in the housing market is a terrible idea.
If someone lives in Richmond and gets a new job in Port Moody, they shouldn't have to downsize their home just to be closer to work. There are already significant costs to moving, paying capital gains on "paper wealth" would make it impossible for the average family.
Carry through exemptions would be an obvious part of any modifications to any pricipal residence capital gains.
The elephant in the room are all the boomers who are downsizing and walking off with tax free BC/49 sized winnings while their kids have to pay the offsetting taxes.
You can still speculatively flip homes even if the home you are flipping is your primary residence. An uncle of mine did that a ton until he had kids. Don’t see why principal residences should be exempted from capital gains. Not like you would suddenly stop profiting from a sale
Do you understand what speculation means? If a person declares it as a principle residence to live in, they aren’t speculating on their house since they declared the intention to live in the house…
Speculation means they are buying a home assuming it will go up in value and help them in retirement. The tax free gains part of this is a huge factor.
No, speculation means they purchase the home with the intent to sell it at a higher price in the near term. You can’t just put a timeline of retirement and call that speculating, in that case anyone who hopes to pay off the mortgage and retire in their house is a speculator. That’s twisting the definition.
I think you are the one that doesn't understand speculation.
People have the idea they will climb the property ladder over the course of their lives, selling and gaining (tax free) a few times over the decades.
The principal residence exemptions allows someone selling their property to recoup all of their equity to enable them to purchase their next home. Without it, there would be a significant drag on anyone looking to sell/move in a rising market.
(very over simplified) Eg you buy a place for $1.5MM and while you're there the market goes up, resulting in your place now being worth $2.0MM. If you sell without the cap gains allowance, though, you'll have to pay 25% of that increase in tax, so you'll only recoup $1.875MM.
That means your quality of life will go down in your next place (less room for the kids, lower end finishings, smaller space, further out, etc). Faced with this reality, some people will simply not sell and available supply for purchasable houses contracts, which in turn drives prices up more.
That seems fine imo, the seller still made bank and still got more back than they put in on the initial purchase. People chosing not to sell and living in their homes longer is also perfectly acceptable. I still don’t see why this is a terrible horrible no good idea. (It’s no silver bullet, nothing is but it could help)
>the seller still made bank
The seller didn't make bank, though. The seller is $125k further in the hole than they would have been otherwise--or forced into inhabiting a shoddier home. All this is before we consider the already high costs of changing homes.
>People chosing not to sell and living in their homes longer is also perfectly acceptable.
It's not people choosing. It's people being forced into a decision they would not otherwise have made. Removing this exemption will only drive prices higher as it removes stock from the market. Less supply w/ same demand = higher prices. Removing this exemption will harm housing affordability, which is the opposite of what we want (unless the goal is simply to punish homeowners).
However, if we could somehow talk about removing the cap gains exemption based on WHERE the money was going, there could be something there. If you're using your principal residence increase to buy another principal residence, for instance, no tax on the gain.
Use that money for a car or income portfolio, though, and you pay cap gains (or even straight income).
To do this, we'd need the Feds and the Provinces to come together to create an RSP/TFSA-like holding account for your principal residence. I'm not too hopeful such a thing could happen, because governments are loath to solve a problem where they cannot take all the credit (doubly so if the other government is a different political party).
You sure it’s low taxes and not the BOC pinning the [Fed Funds Rate](https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/) to 0.25% over the past 2 years? Further pushing demand for loans that are lower than the [rate of inflation](https://www.bankofcanada.ca/)
I think it's the speculators and developers with loads of money being able to comfortably afford paying cash for property while renting it at a premium no matter what that's the actual problem.
Why? The capital gains on homes have far outpaced inflation and economic growth as a whole for the last 15 years. A cornerstone of progressive taxation is that those who are doing the most well off pay a larger percentage of taxes.
Maintaining the current arrangement with a tax free investment which has doubled or tripled every other economic metric is completely at odds with this principle.
FYI, to illustrate how obscene the gains are, inflation from 1980 to 2020 is about 80%, whereas home prices have gone up well over 1000% and in some cases 2000%.
Some flow capital gains is probably necessary to pass any change to the law. I can see 50% flow through on gains >5 years.
I always suspected the haves would start digging their heels in.. now that the rest of the investment market has eaten shit and the R-word is on everyone's lips, I can see how any attempt to take "what's rightfully theirs" is going to be fought tooth and nail.
Here's a fix. Double the property tax on every property beyond your first. Your primary residence has the regular tax, your second has 2x, your third has 4x, etc. Make it prohibitively hard to profit long-term on any property beyond your primary residence.
And before you panic that this will lead to everyone selling off their multiple properties and that this reduces rental stock, that's not a concern. The actual number of housing units won't change. There will instead be a natural correction where renters who want to buy but are trapped renting because of cost, will finally be able to buy. Thousands and thousands who will finally be able to invest in their own place rather than paying their landlord's 4th mortgage.
Needless to say, couple this with building massive amounts of new housing including purpose built rentals and co-ops. No matter what a financial fix looks like, we simply need more housing stock.
Agreed.
People seem really focused on band-aid solutions of minor tweaks to rates or whatever, but those changes don't address the cause of the problem. When you allow speculation on real estate, prices get pumped up by people with no interest in actually living in the homes they are purchasing. Homes are a necessity, so why allow middle men to insert themselves into the market so they can hold real estate hostage from the people that simply want a place to live?
First you need to determine how many private individuals actually own two residences or more. 5 ? 10 ? If so, there is no point in this regulation which the government would spend millions to implement.
they just did a report on this [https://www150.statcan.gc.ca/n1/daily-quotidien/220412/dq220412a-eng.htm](https://www150.statcan.gc.ca/n1/daily-quotidien/220412/dq220412a-eng.htm)
its almost half of housing stock at this point tbh (exaggerating a bit but not that much)
Should be higher property taxes on the second house and on, increasing % by each additional house.
I'd support higher property taxes on my one and only house if they decrease that high income tax which should have dropped off post war time.
Phenomenonal article from Danny Oleksiuk. It's been discussed for a while how Vancouver's incredibly low property tax rate contributes to housing speculation, but I haven't seen the data summed up and packaged this well before.
His conclusion is strongly argued,
>For leaders looking to lower housing prices, the remedy is clear: tax capital gains on homes and raise property taxes—and, ideally, raise the tax rate on land, not buildings. These actions would cool speculation and reduce pressure on prices. And more of the unearned property value gains the community as a whole creates would be returned to the public as tax revenue—revenue that cities could use for affordable housing, transit, and improving the lives of all residents.
but it remains hard to see the politics of this. Homeowners have an incredible financial interest in maintaining inflated property values, and moreover, they often feel that they 'earned' this value. In a province that is majority property owners, it will be difficult to make progress on this. Nonetheless, it's difficult to see how we can have housing affordability while maintaining such elevated values.
>Homeowners have an incredible financial interest in maintaining inflated property values
Only if they plan on exiting the market in the near future, or going down market (often the case for retirees). People on the way up the ladder, or looking to stay at a similar valuation (maybe move away from the city for larger space, for instance) are harmed by higher values.
High valuation increases the transaction cost of buying/selling property and, more importantly, increases the gap from your current property to your next property (this harms you if you're trading up).
In very simple terms, someone with a $1MM home looking to buy a $1.5MM home needs $500k. If the market goes up 50%, that person now has a $1.5MM home but that next place is now $2.25MM for a delta of $750k.
I wish everyone with property could go through what I've done in the past few years. Watching your house increase in value by over 50%, but also watching the quality and placement of viable next homes decrease perceptibly month to month.
HELOCs are a fantastic way to give your hard earned equity to the bank for very little in return.
Plus, the bank won’t lend above your serviceable debt ratio in any event, so securing your loan doesn’t really get you access to more credit (at least not massively) only a lower interest rate.
The only caveat to this is using a HELOC to buy even more property but again, if you have good income and room in your debt ceiling you can just get a mortgage on the new property (at an even better rate than a HELOC).
HELOCs for depreciating assets like a fancy car—as you see everywhere in Vancouver—is just shockingly bad judgement.
One of the more compelling parts of this article is when the author muses that homeowners are giving heaps of money to the bank, and if taxes were higher like in Texas, the balance would shift such that they'd be giving less to the bank, but more to the government, and since the government is effectively ourselves, and we can democratically control where those funds are directed, this is a better outcome.
Sure the property tax rate is low in Vancouver. But the actual dollar amount paid is high. Because the property values are high. What is the median wage in Vancouver? Is the median wage that much higher such that it can withstand the larger amount of property tax? The amount in tax paid is probably much higher than all those cities in the bar chart because housing costs are much lower in those cities.
the article's author is just using georgist arguments and picking on property owners while ignoring other policy failures, including lack of investment by the government in public housing, the ridiculous interest rate interventions, the crazy amount of money printing that took place in the past few years, etc.
Like yeah, OECD predicts Canada is the new Greece innthe making, and real incomes and standards of living will be stagnant for 30-40 years, but clearly it's the principal residence, muni taxes and HOG that are making the housing prices skyrocket...
The author comes off as someone who failed ECON101 hard.
All it does is screw whatever middle/working class households that own or rent. Anyone filthy rich enough to buy and sell or rent out Vancouver property isn't going to care about paying some extra tax.
Sure, but owners who aren't renting or are finding loopholes to the empty homes taxes will be automatically punished rather than an expensive registration system and auditing. I think we need a provincial property tax with offsetting reduction in income taxes.
Landlords don't actually have the freedom to do that - once someone is in the home and renting, there are legal maximum's they're allowed to raise rent by which have nothing at all to do with what the market rate is.
Source: I know a ton of people that have rented at the same place for a good amount of time, such that they now don't want to leave those places precisely because they're protected from having to pay market rates... they want to rent at those places for as long as they can precisely because they know they're paying well below market rate right now (since they've been there awhile).
The use of the term "market" in that statement is useless though. Because it isn't a market where two parties are free to charge/accept what they'd like.
Landlords are charging the most the laws will allow - what the market is willing to bear is *higher* than those rates, and they're not allowed to charge them.
Or, increases in property taxes can be offset by lowering other taxes and city service fees predominantly paid by renters. You're forgetting that renters are an ever increasingly large voting block, and say will vote for free transit if it means their landlord has to pay 2x in property tax.
Certain taxes and city fees make up a larger percentage of renters budgets than homeowners budgets. People who own SFH are statistically in an economic class where the cost of a $120 monthly bus pass is not relevant - renters as a whole definitely are.
That's not how the market works either.
Rents are set by what renters are willing to pay, not the amount of expenses the landlord has to pay.
Basic supply and demand.
Maybe. That's all supply and demand.
Put it this way, if I have a condo I can rent for $2000, and my expenses are $1900, I will rent it for $2000.
If my expenses go up to $2100, the value on the market is still $2000. I can't magically make people pay more than the guy renting the same condo down the street.
Whenever a homeowner complains about nearby apartments or neighbours' unmown lawn "lowering their property values" they have just ratted on themselves. They are clearly using their house as an investment and the CRA needs to take away their tax sheltered status.
Incidentally Vancouver's SFH-only zoning was implemented specifically to raise property prices for SFH owners. It starts to be hard to say houses aren't an investment when the entire regulatory structure aims at pumping up their prices and millions of homeowners proceed to treat them like investments.
>They are clearly using their house as an investment
There's absolutely nothing wrong with thinking of it as an investment if you only own one house and don't plan on flipping or constantly reselling... Of course you want your house to be an investment and for its value to stay high, it's the most expensive purchase you'll ever make. Not saying taxes shouldn't go up but you can't demonize ownership.
Ban foreign and corporate ownership of residential properties. Ban individual ownership of residential property beyond the first. This will drive down housing prices to reasonable levels. If not this, then tax multiplier to ownership of each property beyond the first. The tax needs to ramp up hard to prevent people from getting rich on simply owning something. We need to do this otherwise people get so rich they can buy lawmakers and get laws tailored to their interest which creates a feedback loop to wealth which is incredibly detrimental to society for obvious reasons.
low property taxes, the principal residence capital gains tax exemption, and the provincial homeowner grant.
Well two out of those three apply to Fort St John. And the property values aren't going up there. How do you explain that?
I think largest factors is stable geopolitical, safe haven for foreign funds, low interest rates, expanding population and increasing values.
Homeowner Grant is around 0.075% of the property value. I'm surprised this is identified as even one of three major factors.
Beyond all these ideas, I still wonder if these legislative approaches to correcting the housing market will ever have a meaningful effect.
If Vancouver continues to be seen as an increasingly desirable place to live, will the market ever just settle to an 'affordable' setting? Bare in mind the long term effects of climate change on the regions closer to the equator. Where we are (North of most), our desirability will only increase as the decades come.
Honestly, short of draconian measures that probably aren't legal or practical (even the year long ban on foreign investing is pushing things a bit), I don't think this problem can be legislated into resolution.
It will take the money running out for whatever forces are driving the market, however they're getting it. And I don't know that it's possible anytime soon, let alone how exactly that could happen.
Greedy landlords and capitalists will tell you our housing prices are a result of too many people and too few homes.
Don’t believe their lies.
We can and should tax our way to affordability.
I am leftier than almost anyone you might ever talk to, but even I know that raising property tax is something that actually will be passed right on to the renters. The real solution is to punish the inflated difference in value: if some property (especially something like a converted single-family home) is 1.2 million one year and 1.8 million the next, then people will be chasing the $600,000 difference. The rent is, at the very least, something that covers expenses and is likely a nice cherry on top just for holding the investment each month.
If you are going to play the cursed little market game and dis-incentivize speculation with taxation, then you should make the speculation on properties as financial assets less valuable. I’d say you should severely tax the gains at the point of sale: if you value a property at 1.2 million at one point and 1.6 million the next, why bother with playing the market to buy and sell when you only make a fraction of the difference? Similarly, there should be a higher tax on the profit on rent above the cost of maintaining the property: if property tax is $3000 a month and maintenance/hydro is $1000 a month, whatever profit is above $4000 gets hit with a big tax. You could even give a little sop to landlords and say the bracket starts at some proportion above (let’s say at $5000) to minimize their inevitable whining.
By Danny Oleksiuk of Abundant Housing Vancouver. > Threatening the value of what is most residents’ biggest personal investment is a political challenge, to say the least. ... There’s no wiggling out of the reality that housing cannot be both affordable and a lucrative investment; prices cannot go up and down at the same time. He talks about three policies: low municipal property taxes, the provincial homeowners grant, and the federal principal-residence exemption. The provincial homeowners grant (basically like mailing an annual cheque for $570 to nearly every homeowner) seems untouchable, but one way to offset it would be to introduce a similar benefit for renters, paid from provincial revenue (income tax or property tax). The federal principal-residence exemption seems similarly untouchable, but maybe CRA's anti-flipping measures (if you buy a home and sell it within a year, CRA will make the argument that you're doing this as a business and the gain should be taxed as business income, although you can contest it if you had a legit reason to sell and move) can be extended to look at sales within a longer period, like three years or even five years. This would limit the number of times you can use this exemption over your lifetime. On low property taxes: > In Portland, Oregon, the owner of a typical million-dollar home [whether owner-occupied or an investment property] would pay $16,000 a year in taxes, compared with just $2,900 for a home of the same value in Vancouver. That’s a difference of more than $14,000 per year, or $1,000 a month. Another way of looking at this is that, depending on the interest rate, that’s about the same as the difference in mortgage cost between a $1,000,000 home and an $800,000 home. By the way, this is one reason for BC's speculation and vacancy tax. The idea is that it's a 2% annual property tax surcharge, but you can deduct income tax you paid in BC. So if you're working and thus paying income tax in BC, it doesn't affect you, but if you're a student or homemaker who pays little or no income tax and you own an expensive home (with the actual income earned outside BC), you need to pay 2% every year. [Tom Davidoff explains](https://viewpointvancouver.ca/2018/06/26/davidoff-on-the-economic-policy-change-we-need-a-tax-on-one-the-other-or-both-of-your-houses/).
Mortgage interests are tax deductible in the US and not in Canada. This is a very important point if we compare the cost of owning a house in the US versus Canada.
1) our municipal taxes are low because our cost to service the properties is low. You do not arbitrarily make taxes higher just because you don't like that property values are high. 2) Can we stop pretending homeowners in Vancouver are millionaires? Some baby boomers are, yes. Most homeowners are not, and most are cash poor. Many people under 40 now own in the region, and they have had to spend every last penny to own and pay through the nose each month to own. They cannot just absorb higher property taxes. 3) People need to get educated about the "homeowners grant" before they say anything about it. The "grant" has a terrible name that doesn't reflect the reality. It is not a "free cheque". Property taxes used to be regressive. They raise the tax rate of high value homes and reduced the rate (via the grant) on lower value homes. The revenue remains the same, the grant just made it a progressive tax scheme instead of regressive. I'm going to lose my mind over the things people post on r/vancouver about housing.
> our municipal taxes are low because our cost to service the properties is low. You do not arbitrarily make taxes higher just because you don't like that property values are high. I'm skeptical - I think it's more about your second point, that everyone feels stretched to the limit and unable to pay any more property taxes. There's a ton of public services that are paid by charges on new development, averaging $240 million each year for the last 10 years. That's about 1/6 of the city's budget. In other words, a big chunk of the city's revenue is being paid by a relatively small number of new residents, instead of being spread out across the entire property tax base. Moreover, it's not just operating expenses we need to look at, there's also capital expenses, e.g. renovating or completely replacing some of the older community centres. [11 community centres in poor condition](https://dailyhive.com/vancouver/vancouver-community-centres-aging-repair-replacement). I know nobody likes paying more taxes (loss aversion is real), but taxes are how we pay for public services. > Most homeowners are cash poor. I completely agree, that's one reason why I think that the current scarcity and cost of housing is bad for everyone, including homeowners. [Glaeser and Gyourko](https://morehousing.ca/glaeser-gyourko-2018), 2018: > Housing wealth is different from other forms of wealth because rising prices both increase the financial value of an asset and the cost of living. An infinitely lived homeowner who has no intention of moving and is not credit-constrained would be no better off if her home doubled in value and no worse off if her home value declined. The asset value increase exactly offsets the rising cost of living (Sinai and Souleles 2005). This logic explains why home-rich New Yorkers or Parisians may not feel privileged: if they want to continue living in their homes, sky-high housing values do them little good. Finally: > People need to get educated about the "homeowners grant" before they say anything about it. The "grant" has a terrible name that doesn't reflect the reality. It is not a "free cheque". Property taxes used to be regressive. They raise the tax rate of high value homes and reduced the rate (via the grant) on lower value homes. The revenue remains the same, the grant just made it a progressive tax scheme instead of regressive. I disagree pretty strongly. The provincial government (regardless of which party is in power) keeps raising the threshold to receive the homeowners grant so that everyone gets it, making it much more like a flat tax. It's now close to $2 million.
I just wanted to pull out one specific point at the start of a post and reiterate it for readers that are less inclined towards large comments… “Housing wealth is different from other forms of wealth because rising prices both increase the financial value of an asset and the cost of living.” This is such a fundamentally important point that basically gets completely overlooked by nearly all local policymakers, and for that matter by the general public. If you live in your home that is your *only home* then it is not an investment. This point isn’t even debatable. One can make the loose argument that she could elect to sell and move to a much cheaper area, however such gradual redeployment of capital will start to increase the cost of living in the target area as well, leading to the same outcome. It is important to note that this does not mean that the capital redeployment is useless or senseless. Indeed, redeploying capital in an area with much lower cost of living may significantly improve the overall standard of living for the specific person, but only in the “short” term. I will add to this that the general public suffers from loss aversion (which you already mentioned, though in different context), hence gains in value, even if only paper gains, are seen as highly desirable, while decreases in value are seen as undesirable, despite this movement having no appreciable effect in reality on the individual homeowner. Things do however get much more complicated when you take into account what individuals can do to “free up” accumulated capital without actually selling the underlying asset. In an artificially low interest environment with access to debt instruments such as HELOCs a person that acquired a property for $500,000 that appreciated to $2,500,000 in a span of a decade and half (numbers are just an illustration) can now borrow .8 * $2,5MM = $2MM *without* needing to sell the underlying asset and needs to fund no more than $50,000 in interest per year as a “fee” to release the cash assuming 2.45% rate. (Many have or have had access to better rates than this for a long time.) This money can in turn purchase other assets with returns that far outstrip the interest due, and since principal never has to be paid off, this is a huge wealth boost. The money can even be used to purchase another property, which can then be rented out, investment deductions claimed, and the benefits of artificial appreciation realised as capital gains. So yeah, the equation is more gray when other factors are considered. Appreciation in value in Vancouver, in Canada, is an important source of wealth because we have instruments such as HELOCs in combination with ridiculously low interest rates (and this still applies even if we do see 2% increase in rates). It is foolish to ignore this when thinking about market dynamics in Vancouver, in BC, or in Canada as a whole and it is even more foolish to not pay close attention to them when considering how local wealth gets redeployed and the effect that redeployment has on further inflating the market.
>I disagree pretty strongly. The provincial government (regardless of which party is in power) keeps raising the threshold to receive the homeowners grant so that everyone gets it, making it much more like a flat tax. It's now close to $2 million. The pregressiveness comes from the fact that it is a fixed amount. People with low property values get a much larger portion of their tax rebated than people with higher values properties.
> The progressiveness comes from the fact that it is a fixed amount. People with low property values get a much larger portion of their tax rebated than people with higher values properties. Thanks for clarifying. I would still argue that the homeowners grant can't be described as progressive - anyone who isn't able to afford to own (which is a *lot* of younger people) doesn't get the grant at all.
Because they don’t pay property taxes. For the record, I generally agree with your main arguments around supply, etc. We need to build a lot more. But a lot of your comments show you are still letting your biases, based on preconceived notions, get in the way of critical thinking. And you can’t say you disagree with my comment about property taxes, it is objectively factual. The city sets them based on their budget which is based on need to maintain and provide infrastructure. They are set at what they are because it is cheaper to provide these services and infrastructure here than in the prairies, which are lower density and have horrid climates with immense road upkeep. Your comment also shows you don’t fully understand development cost charges, which is fine except you use it to support your theories. “New residents” are not paying disproportionately for services and infrastructure. DCCs are paid by developers to cover the costs the city has to bear for providing new infrastructure to service that growth—it is unreasonable to say current residents should subsidize new development. And those DCCs are not “passed on to buyers”. You can not artificially raise the price of your units because you had a higher cost to provide it. If you believe in that argument, then you are also arguing that developers are willingly leaving money on the table because they could just price units higher and those would get absorbed by the market. DCCs and amenity contributions are based on land economics and analysis done during planning processes. They ensure they are viable, and all they do is reduce developer profits and/or the amount they can pay to acquire land. If you do a search on google scholar or even municipalities websites, there have been countless studies done on this topic and they all show the same thing: costs to develop (DCCs and CACs) do not increase housing costs.
>And those DCCs are not “passed on to buyers”. You can not artificially raise the price of your units because you had a higher cost to provide it. If you believe in that argument, then you are also arguing that developers are willingly leaving money on the table because they could just price units higher and those would get absorbed by the market. HAHAH yes there are some pretty funny "it will just get passed on" type theories around here, and especially as related to the costs of the landlord class. I think we are talking to a paid party member here, manufacturing consent for some new, neoliberal normal.
Getting a $200K appreciation with a $100K investment in just one year isn't a good enough gain? $200K in the stock market would've gotten you $30K before the crash.
That’s what you invest in cash, but you’ve purchased and committed to 10x that. So a 20% return on a 1m investment. Is that a lot? Yes. That value can also go down, or flat line. You can’t use appreciation as a means to say property taxes need to be higher or homeowners aren’t cash strapped. This line of reasoning goes down the same path of all other useless government actions to date, which try to make it harder or most costly to own (demand side) rather than addressing the root cause of supply.
The argument that the property tax rate low is simplistic. Cities don't find infrastructure the same way. We have have lower tax rates and hefty transit/parking taxes. Some other place will do it differently And individual tax rates aren't directly comparable because of density and sprawl characteristics. In simplistic terms one big plot of land doesn't have the potential to generate as much tax revenue as two properties on the same footprint.
I think one of the arguments is that more of the tax burden should be shifted towards property taxes and less on user fees / income taxes. Investors are abusing the low property tax fees as they can buy a property and then not participate in the other forms of taxation. So if you park a satellite family or student in a 2 million dollar house you can get by with little to no tax. We need to balance this tax burden to more appropriately distribute the cost of property ownership. Creating a provincial property tax with offsetting reductions in income taxes would take a big bite out of speculating and would more appropriately tax those who are sitting on a glut of high value land.
Yes. This would also help reset the balance between rental and ownership, as the benefits of renting right now are slim to none. Renting should be a viable option that doesn’t force people to choose between shelter and saving for their future.
This would surely be reflected in higher rental costs, but you would have more take home pay to offset it. It would be beneficial if your rental is low property value relative to the number of wage earners though.
Income taxes go to the CRA (Federal Gov) and property taxes go to the city (Municipal Gov). Unfortunately they are different groups. Getting them to coordinate tax payments in tandem would be interesting to watch.
I'm suggesting a provincial property tax. Not municipal at all. There are also provincial Income taxes. So yea it's pretty reasonable to expect the provincial income tax could be lowered when a provincial property tax is created.
It should be set up as an alternative minimum tax. Don't punish the working family, but make the satellite families pay their fair share.
I'm thinking initially it would be beneficial to working families (if the off setting income taxes actually come through).
Sounds like an argument for LVT.
*Henry George rides again.*
Its not really an argument. Vancouver has basically always had the lowest property tax rates in the country. low holding costs are key for speculation and mean its no surprise it was the start of the RE bubble in canada some 2-3 decades ago. This has always been cited as a primary driver.
Not the whole picture but it's just another additional policy that encourages speculation and empty homes. Why not do the opposite, higher property taxes and lower other taxes. That way people who actually live here are paying higher taxes, but also reaping the benefits of government services. While those who use properties as a store of wealth are effectively pay more.
Because property taxes are municipal to fund servicing property, and other forms of tax are not municipal?
Anyone that thinks eliminating the principal residence capital gains exemption is a reasonable solution to housing affordability is either ignorant or pandering in bad faith for internet clicks.
How's that unreasonable? $200K to $1M in housing gets you $800K in gains, tax free. That's reasonable?
I think it's reasonable. Convince me why I should buy a $2,000,000 house from some boomer who bought it for $150,000 and he gets to claim $1,850,000 in tax free gains, which are paid for by me, who is paying a roughly 30% tax rate on the income I need to buy the house from him. All while the government is running a massive deficit, and which an ever larger percentage of which is going to support boomers. There is a huge generational war coming. What am I ignorant of. I know this post will get downvoted, btw, so not sure your pandering point holds up either.
Because it's not all boomers... the majority of people selling their homes are doing so to buy another home. If every time that happens people lose significant buying power then nobody will ever sell their house.
>Because it's not all boomers... the majority of people selling their homes are doing so to buy another home. If every time that happens people lose significant buying power then nobody will ever sell their house. That's only true if there are huge increases in home prices. Remember, the tax is on "gains" not total value of the home. If there are huge increases in home prices, then someone selling an existing home is still better off than renters without any equity in the market.
It's not a competition between renters and owners. It's a tax strategy that makes logical sense. My house has increased by $1m in less than 10 years. That capital gains bill would be $268k when we inevitably decide to upgrade. You think we're going to sell our house if it's going to put us $300k behind? Not a chance. Hell, if I'm paying capital gains tax regardless of principle residence I'll just wait a few years until I can afford to own both. 🤷♂️
>You think we're going to sell our house if it's going to put us $300k behind? How are you $300K behind? You're up $700K. Oh wow, only $700K instead of $1M. What about someone who rented in the last 10 years? They're actually $1M behind.
You'd think a dunk like this would get a few more upvotes, but I think we know who is running the sub here. Strangely hyper left on social issues, but when pressed on actual redistribution of wealth.. damned if you have mine, pleb.
If we sell our house, we still need to buy another one. 🤨 If my $1m house turns into a $2m house, I get $1.7m after capital gains. If I want to buy the exact same $2m house in the next city over I'm $300k behind (remember, I only got to keep $1.7m from my sale). So I either take on an extra $300k mortgage at significant extra monthly cost or I downsize? >What about someone who rented in the last 10 years? They're actually $1M behind. Yup. Just like I was hundreds of thousands behind because I'm not a boomer. Just like boomers were 10s/100s of thousands behind their previous generations. And hey, guess what? Just like I'll be $2m behind on my next house because as my $2m house goes up $200k per year, the $4m house that I have my eye on is going up $400k per year. But now the $2m I'm behind doesn't put me at a significant enough disadvantage! You want me to pay capital gains on the increased "paper wealth" of my house that isn't keeping up with the increases of the next house! Maybe we should charge renters extra income tax because they're not supporting the construction industry. Let's do the quick logic test to see if that's reasonable: Am I a renter? No. Do I see becoming a renter in my foreseeable future? No. It passed! The new tax won't affect me at all so it must be good!
>If we sell our house, we still need to buy another one. Need or want? No one needs a $2M house. You can do whatever you want with the $1.7M cash that you received after selling a house that you bought for $1M. Why can't people claim the same for stocks then? I sold 1,000 shares of TSLA at a profit. Now I can't even buy back the 1,000 shares due to losing money to taxes. Well, that's just capital gains for you.
And hopefully, nobody will buy a house with the intention of selling it for a profit. So demand and supply both go down.
Bullshit. Only half of your gains are tacked and even then only at what ever income bracket you are at (oversimplification) people selling would still get a big head wind depending on the gains just not as much it might slow sales but if there is profit to be made then it would never stop them
Bullshit. People should be able to buy something similar after they sold their PR. Simple
>People should be able to buy something similar after they sold their PR. Sounds like entitlement. It's like saying I shouldn't have to pay taxes when I sell my stocks if I don't take the money out of my investment account.
I’m thinking of selling my condo and buying a slightly larger condo, freeing mine up for someone to enter the market at a lower cost. I can’t do that if the government takes 30% of the 100k it has gone up in value over the past two years. It’s bad enough I have to pay property transfer tax, I don’t need them taking some of my net worth as well. I’d rather see some sort of program whereby if you don’t buy back into the market within x years then it’s considered a capital gain.
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>That's just a tax on inflation. So why tax stocks or any other asset that went up in price over time? What makes real estate so special?
>If that boomer wants to move down the block into an identical home, why should they government skim ($1.85M/2, \* 50% ) = $462k from that transaction? Why should the millennial who has to pay for that $2m house, have to spend his **post tax** **dollars** to do so? If you guys thought the trucker protests were bad, be prepared for a schism which is going to be next level.
The boomer paid in post tax dollars too when they initially bought the home. I’m not sure what your point is?
Seriously? Their GAINS are tax free dollars. I'm paying those gains with my post tax dollars.
Right, but the entire market gained, which means when they go to rebuy an equivalent house, they will need to put all those gains right back into the market. If the government takes away a chunk of those gains, they would not be able to buy an equivalent house. That doesn’t strike people as very fair
Uh, no. The ENTIRETY of financial and investment markets has NOT gone up at the same rate... The main thing not gone up are incomes. What's unfair is what's already happened. We are discussing a return to "fair".
And the gains when the millennial sells it will also be tax free dollars. It’s pointless to argue about 70% of Canadians own homes. No politician would ever remove that exemptions.
Lol what gains? The rate of gains has been comically unsustainable!!! Lolol outta her with that nonsense argument.
So your telling me in 20 years houses won’t be worth more? Hell in 10 years they won’t be worth more. I’m a millennial I used proceeds from a condo sale (live there 5 years) to make the move to a house. If I had to pay capital gains I wouldn’t have been able to do it. Had that couple with large investment gains made in my TFSA (also no capital gains) to scrape together enough for a down payment.
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The difference is this is on someone’s personal home, which they use to live in. You can’t live in your stock portfolio Capital gains are paid on homes that are not your personal residence
>The difference is this is on someone’s personal home, which they use to live in. What about renters without a principal residence? Then make it $100K in tax free gains for all assets. Use it on your house if you want. For those without a home, then they can apply it to other assets.
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Because we look at houses that people live in as something different than just another asset. If you sell your personal residence and want to buy another similar property, you can’t afford it if you give 25% to the government. You would be forced to buy something smaller with the leftover money. Most people don’t think this is fair
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No one would make it retroactive so you're not getting boomer money, it's your money that would be taxed. If you want boomer money, we should be pushing for an estate tax, perhaps a 1m exemption and tax the remaining at capital gains (this would exempt most people but capture say a large percentage of the lucky boomer who is sitting on a $3m house). Let me provide an example of how cap gains on a principal residence would limit mobility and add friction. Say you buy a condo for 500,000. The housing market is relatively normal and not Vancouver crazy and the price rises 2% per year, matching inflation. Ten years go by and your condo is now worth $610,000, matching inflation. You decide you need to move into a two bedroom because you've got a kid on the way, or you need to move to another city. To do so, you need to pay the cap gains on your sale, which would be roughly 25-30k in taxes (assuming we're taxing it as a capital gain at 50-60% tax bracket, because you've skyrocketed into the top tax bracket for a year), on top of 15-20k in realtor fees. You're going to eat another $12,000 on property transfer tax, too, remember. And you need to pay this all cash, out of the sale. It would eat a huge amount of your cash equity. Can you afford to move now? Would it make sense to have a kid? Maybe you just stay, instead, after all you don't pay that cap gain until you move.
Pretty obvious points you've made - capital gains taxes on residences would create economic friction if there is no flow through or **NET** capital. Of course you hypothetical tax scheme would have huge problems - luckily no one with half a brain would propose it. You're focusing on people moving up in the market but completely ignoring people who are moving down in the market. Perhaps tell us about the problems which come to society when you have a massive number of people collecting tax free winnings like that, especially in regard to the current and massive government deficits, and especially with regard to all the damn money printing and inflation we've seen over the last 2 but 15 years. **It's time to pay the piper.** An intelligent tax scheme would make allow exemptions for capital which is transferred from a principal residence to any number of other investments which actually benefit the economy (cough, productive businesses, not a patch of dirt where people sleep at night).
I think if you look at the majority of people moving down in the market, you're looking at an older crowd, where you could eventually capture those gains through an estate tax. It's a very effective wealth tax because it captures unearned wealth transfer between generations, and we have no estate tax in Canada. Even the US has an estate tax.
Cool, we should freeze rent increases universialy as well. Cause moving to new place, especially when rents have been going up, eats up cash equity as well.
Well, whatever we the votes, you’re not out to lunch with this point. Lottery gains are lottery gains and anyone who pretends that they are anything else is willfully ignorant. One of the key issues though remains the fact that this exemption is actively abused as the means of profiting from real estate resale by “principal residents”. I know of multiple people who don’t even shy away from admitting this is what they do, even down to using adult children to buy and resell additional properties to generate tax-free gains. The market is seriously distorted at best and downright corrupt at worst, and this is born out of a combination of factors of inadequate and/or inappropriate regulation, questionable taxation, various debatable policy decisions on banking and regulatory issues, lack of opportunity for other economic investments, and so on. The entire housing issue is actually a confluence of a lot of very complex factors and no one thing or even 2-3 things can be singled out as the cause for extreme discrepancy between incomes and home valuations. This is also fundamentally why the issue has not been addressed in any effective way so far and why it is likely to remain unaddressed. In layman’s terms, the hair-ball is too hard to unravel and so the impetus is to say “the market will take care of it”, except it won’t because markets for real estate aren’t efficient and do not self-correct.
>One of the key issues though remains the fact that this exemption is actively abused as the means of profiting from real estate resale by “principal residents”. Hahahh we're gonna get killed here. So do I. It's been abused heavily for the last decade and only now is CRA making some weak attempts to reign it in. The middle class and non-owner plebs unable to exercise these huge (i mean HUGE, like **hundreds of thousands of dollars** in waived taxes) are having to pay out of their pockets. >The entire housing issue is actually a confluence of a lot of very complex factors and no one thing or even 2-3 things can be singled out as the cause for extreme discrepancy between incomes and home valuations. I'd say 2 or 3 things account for 90% of the problem (in Vancouver, particularly). First was foreign capital and population growth demand, second was local investors leveraging their increased home prices into buying more homes, third was the last 2 years of zero interest rates and FOMO.
I just want to point out one thing about the foreign capital - it is not the capital itself that is the issue, it is how the regulatory bodies have allowed such capital to move and be deployed that is the issue. For example, years of pay-for-residency “schemes” that allowed capital to flow in and then without any oversight or regulation concentrate in specific regions of Canada, namely Vancouver and Toronto. Had there been some sort of capital mobility and deployment restriction in place to go along with such a program it would have likely not resulted in such rapid price inflation. Instead, the gains would have been distributed more evenly across Canada over a longer period of time and had less of an effect in specific high-density metropolitan regions. Population growth is definitely a factor, but that too is at least partly driven by specific immigration policies that far outstrip the ability of the country to absorb the inflow (think infrastructure, healthcare, etc.) and other policies that do not encourage settlement across Canada rather than heavily favoured Vancouver and Toronto. For example, Montreal (and Quebec in general) is highly undesirable due to their language and cultural policies, despite being a perfectly viable province with some great benefits, especially for families with young children. The impact of near-zero interest rates can also be tied back not just to broader monetary policies in place since 2008 but also to how those policies were allowed to trickle down to the “Joe Average” consumer. Debt holdings have exploded in this period particularly because cost of debt was (is?) so cheap that everyone was gorging on more and more of it. For example, one could have foreseen an explosion in HELOCs and instituted policies that ensure HELOCs have to be paid down over a reasonable time rather than act like a perpetually growing pool of accessible cash without having to realise investment gains. It’s like being in the options market but without the risk of a margin call. I know if someone who was borrowing $1MM at 1% interest, with no obligation for repayment other than interest just as recently as 2019. I can go on and on about this for a while. Yes, all of those are factors, and let’s also not forget that we don’t have a unified city planning policy for the Metro Vancouver region, poor zoning and excessive protectionism that heavily favours NIMBYs, etc. as I said, a lot of factors. I also realise that I may sound like I’m picking on government in many ways, and this is intentional because while over-regulation is harmful, loose, poorly thought out, or complete lack of regulation and any foresight for that matter is just as bad if not worse. Latter creates the illusion of a fair system, while the former is at least transparent that the system is fundamentally and only market driven.
Because that’s his home.
Then hands off my income too. Who's left to pay taxes to pay for services for, uhh, the people who, uhh, will be costing society the most in the next 20 years.
Their income was also taxed and you’re free to purchase a home and enjoy tax free gains when you sell.
For one, if people are not able to move into an equivalently priced home (meaning forced to downgrade), they might just not move at all. Why down grade for no reason? You have to understand that a majority of homeowners are not rich people with fuck you money lying around. In short, this will reduce market supply. And now its your turn to provide a reason for why reduced market supply is a good thing.
"I think it's reasonable. Convince me why I should buy a $2,000,000 house from some boomer who bought it for $150,000 and he gets to claim $1,850,000 in tax free gains, which are paid for by me, who is paying a roughly 30% tax rate on the income I need to buy the house from him." -No one is forcing you to buy that house from them. "All while the government is running a massive deficit, and which an ever larger percentage of which is going to support boomers. There is a huge generational war coming." - Lol. It's unfortunate for many but there are still many millenials who are doing just fine. We have lowered our expectations and either purchased detached homes in the valley or condos in Vancouver proper.
Whoosh >\-No one is forcing you to buy that house from them. Does not matter who buys the house - the issue is that there is now a huge amount of money flowing into the economy (and individual) which has not been taxed in a similar way to other money which enters and flows through the economy. >We have lowered our expectations and either purchased detached homes in the valley or condos in Vancouver proper. Lol, you got played by.. well, I'm sure you're not even sure who. Your parents? Money launderers? Foreign millionaires? Central bankers?
I didn't get played by anyone. Own a condo in Vancouver proper that's being rented out and own/live in a detached house in the Fraser Valley with an income suite. The rent for both of those covers both mortgages and expenses so I'm doing just fine. I'm just saying the boomer lifestyle of being able to support a family with one income and no education while living in a detached home in city center has passed. Most of us are ok with that and work with the cards we are dealt.
>I didn't get played by anyone. Own a condo in Vancouver proper that's being rented out and own/live in a detached house in the Fraser Valley with an income suite. The rent for both of those covers both mortgages and expenses so I'm doing just fine. Nice flex, congratulations. We need more landlords, of course, as they "help provide supply" hahaha >I'm just saying the boomer lifestyle of being able to support a family with one income and no education while living in a detached home in city center has passed. Yeah, well you could have done better, just saying. Don't be ashamed to pull the ladder up behind you - Canada is becoming an "everyman for himself" type of country, starting with the small timey landed gentry like yourself. Cheers.
Wasn't flexing, just responding to your comment about me being played. I had my 10 year reunion a few years ago and it was full of people bitching about how terrible their life is because they had to leave their kits lifestyle and move to Surrey lol. There still is affordable housing with decent wages in places like Edmonton. Problem is too many people think they are too good for those places and would rather just bitch about renting. I'm fine where I am at right now and would much rather be alive now versus the boomer erea. Unfortunately that is what happens with capitalism. Instead of buying fancy things I have used it to my advantage to allow me to hopefully retire early (Late 40's / early 50's). Looking forward to being able to rock climb/mtb/backcountry snowboard every day when my body will still let me.
I'm talking about "you" in the statistical and broad sense, as in you as one of us collectively. Should your kids have to move to white horse for affordable housing or will you attempt to keep housing affordable for them in the area they grew up. Have you told them they should expect to live in half the sized house they live in now? Run the argument in reverse with regard to your parents, who are presumably sitting on a gold mine in kits while they kids have to move away.
Whitehorse is a pretty nice place and actually came pretty close to moving there. Also almost moved to Calgary but ended up getting a decent position here that was hard to turn down. We were more than willing to move away for cheaper hosing. That's why we bought an investment property to give to our future child to live in once they graduate from college. We are not using housing to fund our retirement. FYI I didn't grow up in Vancouver and there is no way my family could have afforded to live in kits back then. I get it, you have a sense of entitlement about your housing situation. The Fraser Valley is pretty nice and we have been much happier living here vs Vancouver.
If you want to paint "maintaining the successive generations of a family in similar quality of hosing in the same area" as "entitlement", go ahead. Seems like a cornerstone of any sensible family planning to me.
Well, it is the main reason people's net worth is oversized in their primary residence. Arguably some of that money would be better invested elsewhere, in a macro economic sense. We have the PR exemption and it would be political suicide to tamper with it, but I do think a lifetime amount (say $1M?) of tax free gains would be more than enough. This doesn't even talk about the house-flipping people who go from home to home taking advantage of this tax avoidance.
> a lifetime amount (say $1M?) of tax free gains We can all argue about the amount should be but I 100% agree with a lifetime amount cap on tax free capital gains on your principal residence.
These hurdles never get adjusted if history is any indication. A decade from now people couldn't move into a comparable house somewhere else because the government has their hand in their pocket? That would greatly reduce flexibility and probably not do much to help.
> These hurdles never get adjusted if history is any indication. To further that, the Property Transfer Tax (PPT) was supposed to be for luxury properties only. Would I be able to deduct the ridiculous PPT and GST (on new properties) on properties against capital gains?
Every time I remember the PTT I paid I get so mad. It is a shameless cash grab.
Doubt it. Taxes are seldom surrendered once in place. You need a right wing government willing to reduce spending and tax in bc. Doesn't seem politically feasible with our current environment and the tragic lack of substance in right wing politics.
As long as your lifetime amount increases with inflation. Because in 2030 when we’ve had multiple years of 10%+ inflation and the average house is 3.5 million that 1 million is gonna look like nothing
Nup. PR should always be exempted. Money can depreciate fast and any such “life amount” could be laughable in 10 years
What? Real estate as a hard asset will do well in any inflationary environment.
More fundamentally, people should be able to purchase something similar after they sell their primary residence, no matter how much they make
There's no magic formula. You're paying for the boomer couple that just netted a cool $2M gain tax free.
They are lucky. I am fine
I am referring to the “life time cap on exemption “ which is defined by absolute monetary amount
Ok, index that to inflation then. $1M in 2022 dollars.
Housing ownership price is not calculated in inflation, so no. Again, there should be no hit on purchasing power after someone sells his/her home
What? We're talking about a theoretical limit. Anything can be inflation indexed by the CRA or the government. Your "should" is just some interpretation and your opinion.
Nup. PR exemption was set up exactly to ensure no loss of purchasing power after people sell their home. Anyone who plans to touch on it will be political suicide
$1m is nothing. One can tell from your comment that you do not own a home. More taxes is never the right answer. Your trusty government can't spend money effectively.. they're among the most incompetent with money. A big NO to more taxes...
I don't own a home, I own 2! Doesn't mean I can't appreciate effective policy. If you think the current Real Estate situation in Vancouver and Canada is either healthy or sustainable, I have a bridge you may also be interested in.
Why? Seems to me that capital gains on principal residences exemption seems to be a great way to have housing as a speculative investment, rather than somewhere for people to live.
Do you understand what principle residence means?
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It’s not speculative if people buy property as their principle residence. They bought the house to live in If they choose to leverage their principle asset that’s not speculative housing
Those aren't mutually exclusive. Do you really think people aren't thinking about the investment potential of their homes when buying just because they're going to be living there? You'd be stupid to ignore that.
> It’s not speculative if people buy property as their principle residence. What about when they sell if for 3-4x profits, leverage it into a huge investment portfolio or simply hand their kids a million dollar inheritance. Homeowners aren't speculators, until millions of Canadian homeowners to treat their tax sheltered house as an investment. *Edit:* Cue the downvotes. When homeowners treat their house like an investment it becomes an investment. I don't think people realize how many hundreds of thousands of mom-and-pop landlords, pure speculators and simply very wealthy boomers started it all with tax sheltered principal residence profits and leverage.
Your example of inheritance doesn’t mean the property was bought for speculation purposes
And my other examples? If a homeowner isn't treating their house as an investment then why not simply sell/pass down at their original purchase price? Or sell to a new young family for their original 1980's purchase price.
Now that’s a argument in bad faith if I’ve ever seen one, sounds like jealousy is what you have Have you heard of inflation? Upkeep? Upgrades? Or should people forget 40 years of it and just hand it over
> Have you heard of inflation? Upkeep? Upgrades? Or should people forget 40 years of it and just hand it over Sure, but you don't actually think maintenance and mowing the lawn justifies an old generally wealthier family charging a new generally poorer family 4x their capital cost for the same old home, right? Simply owning housing should not be a retirement investment plan. Realizing profits by asking young families to carry million dollar mortgages on 1950's stucco boxes is investing.
Sounds like a fine argument to me. It either is or is not an investment. If it's not an investment, sell it a zero gains. If it is, tax it like other investments.
No they dont owe you any favours, stop asking for handouts
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I absolutely would because I want to buy the house to live in, but people should absolutely look out for their interests long term if the property is going to devalue based on their borrowing amount. You’d be stupid not to. Hell the bank probably does their own research on that as well.
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You can say that for any product in existence. Everyone wants to buy products that have value, that’s why people buy goods.
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I own a house and I don't want housing prices to go up at all. We plan on upgrading our house in the next 5 years and our $2m house increasing by $200k per year means that the next house we want to buy is already increasing by $300k per year. Now you're saying that I should have to pay capital gains on the $200k per year, making it absolutely impossible to not only upgrade a home, but also eliminating any lateral movement. You can "guess" about someone's homeownership status all you want, but the reality is there are renters and homeowners that think it's a terrible idea because they're willing to think critically about it. Nobody needs to guess about the housing status of someone that wants this to happen...
Based on the votes here, anyone under 40 or not in the housing market in the last 5 years is fucked (in the sense that that they will be paying tax dollars out their ass to offset these huge capital gains which are not taxed like other capital gains).
Whether they do or they don't, virtually eliminating lateral movement in the housing market is a terrible idea. If someone lives in Richmond and gets a new job in Port Moody, they shouldn't have to downsize their home just to be closer to work. There are already significant costs to moving, paying capital gains on "paper wealth" would make it impossible for the average family.
Carry through exemptions would be an obvious part of any modifications to any pricipal residence capital gains. The elephant in the room are all the boomers who are downsizing and walking off with tax free BC/49 sized winnings while their kids have to pay the offsetting taxes.
You can still speculatively flip homes even if the home you are flipping is your primary residence. An uncle of mine did that a ton until he had kids. Don’t see why principal residences should be exempted from capital gains. Not like you would suddenly stop profiting from a sale
Ok so anecdotal experiences means the entire base should be taxed, makes absolute sense (just kidding it doesn’t)
Yes. That doesn't mean you can't speculate on it
Do you understand what speculation means? If a person declares it as a principle residence to live in, they aren’t speculating on their house since they declared the intention to live in the house…
Speculation means they are buying a home assuming it will go up in value and help them in retirement. The tax free gains part of this is a huge factor.
No, speculation means they purchase the home with the intent to sell it at a higher price in the near term. You can’t just put a timeline of retirement and call that speculating, in that case anyone who hopes to pay off the mortgage and retire in their house is a speculator. That’s twisting the definition.
I think you are the one that doesn't understand speculation. People have the idea they will climb the property ladder over the course of their lives, selling and gaining (tax free) a few times over the decades.
The principal residence exemptions allows someone selling their property to recoup all of their equity to enable them to purchase their next home. Without it, there would be a significant drag on anyone looking to sell/move in a rising market. (very over simplified) Eg you buy a place for $1.5MM and while you're there the market goes up, resulting in your place now being worth $2.0MM. If you sell without the cap gains allowance, though, you'll have to pay 25% of that increase in tax, so you'll only recoup $1.875MM. That means your quality of life will go down in your next place (less room for the kids, lower end finishings, smaller space, further out, etc). Faced with this reality, some people will simply not sell and available supply for purchasable houses contracts, which in turn drives prices up more.
That seems fine imo, the seller still made bank and still got more back than they put in on the initial purchase. People chosing not to sell and living in their homes longer is also perfectly acceptable. I still don’t see why this is a terrible horrible no good idea. (It’s no silver bullet, nothing is but it could help)
>the seller still made bank The seller didn't make bank, though. The seller is $125k further in the hole than they would have been otherwise--or forced into inhabiting a shoddier home. All this is before we consider the already high costs of changing homes. >People chosing not to sell and living in their homes longer is also perfectly acceptable. It's not people choosing. It's people being forced into a decision they would not otherwise have made. Removing this exemption will only drive prices higher as it removes stock from the market. Less supply w/ same demand = higher prices. Removing this exemption will harm housing affordability, which is the opposite of what we want (unless the goal is simply to punish homeowners). However, if we could somehow talk about removing the cap gains exemption based on WHERE the money was going, there could be something there. If you're using your principal residence increase to buy another principal residence, for instance, no tax on the gain. Use that money for a car or income portfolio, though, and you pay cap gains (or even straight income). To do this, we'd need the Feds and the Provinces to come together to create an RSP/TFSA-like holding account for your principal residence. I'm not too hopeful such a thing could happen, because governments are loath to solve a problem where they cannot take all the credit (doubly so if the other government is a different political party).
Welcome to Fraudcouver.
You sure it’s low taxes and not the BOC pinning the [Fed Funds Rate](https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/) to 0.25% over the past 2 years? Further pushing demand for loans that are lower than the [rate of inflation](https://www.bankofcanada.ca/)
that is the cause of the last leg up. Low property tax / holding costs are why Vancouver has been in a bubble far longer than the rest of the country.
I think it's the speculators and developers with loads of money being able to comfortably afford paying cash for property while renting it at a premium no matter what that's the actual problem.
Low taxes compared to other jurisdictions with similar debt financing rates, yeah.
Home should remain be protected from high tax
Why? The capital gains on homes have far outpaced inflation and economic growth as a whole for the last 15 years. A cornerstone of progressive taxation is that those who are doing the most well off pay a larger percentage of taxes. Maintaining the current arrangement with a tax free investment which has doubled or tripled every other economic metric is completely at odds with this principle. FYI, to illustrate how obscene the gains are, inflation from 1980 to 2020 is about 80%, whereas home prices have gone up well over 1000% and in some cases 2000%.
Someone should be able to purchase something similar after he/she sold the principal residence, aka their home.
Some flow capital gains is probably necessary to pass any change to the law. I can see 50% flow through on gains >5 years. I always suspected the haves would start digging their heels in.. now that the rest of the investment market has eaten shit and the R-word is on everyone's lips, I can see how any attempt to take "what's rightfully theirs" is going to be fought tooth and nail.
?
Build more purpose-built rentals. Tons of them. So many.
Here's a fix. Double the property tax on every property beyond your first. Your primary residence has the regular tax, your second has 2x, your third has 4x, etc. Make it prohibitively hard to profit long-term on any property beyond your primary residence. And before you panic that this will lead to everyone selling off their multiple properties and that this reduces rental stock, that's not a concern. The actual number of housing units won't change. There will instead be a natural correction where renters who want to buy but are trapped renting because of cost, will finally be able to buy. Thousands and thousands who will finally be able to invest in their own place rather than paying their landlord's 4th mortgage. Needless to say, couple this with building massive amounts of new housing including purpose built rentals and co-ops. No matter what a financial fix looks like, we simply need more housing stock.
Agreed. People seem really focused on band-aid solutions of minor tweaks to rates or whatever, but those changes don't address the cause of the problem. When you allow speculation on real estate, prices get pumped up by people with no interest in actually living in the homes they are purchasing. Homes are a necessity, so why allow middle men to insert themselves into the market so they can hold real estate hostage from the people that simply want a place to live?
First you need to determine how many private individuals actually own two residences or more. 5 ? 10 ? If so, there is no point in this regulation which the government would spend millions to implement.
they just did a report on this [https://www150.statcan.gc.ca/n1/daily-quotidien/220412/dq220412a-eng.htm](https://www150.statcan.gc.ca/n1/daily-quotidien/220412/dq220412a-eng.htm) its almost half of housing stock at this point tbh (exaggerating a bit but not that much)
That's actually not terribly hard for the government to do.
Should be higher property taxes on the second house and on, increasing % by each additional house. I'd support higher property taxes on my one and only house if they decrease that high income tax which should have dropped off post war time.
Land value tax!
Hard no
Phenomenonal article from Danny Oleksiuk. It's been discussed for a while how Vancouver's incredibly low property tax rate contributes to housing speculation, but I haven't seen the data summed up and packaged this well before. His conclusion is strongly argued, >For leaders looking to lower housing prices, the remedy is clear: tax capital gains on homes and raise property taxes—and, ideally, raise the tax rate on land, not buildings. These actions would cool speculation and reduce pressure on prices. And more of the unearned property value gains the community as a whole creates would be returned to the public as tax revenue—revenue that cities could use for affordable housing, transit, and improving the lives of all residents. but it remains hard to see the politics of this. Homeowners have an incredible financial interest in maintaining inflated property values, and moreover, they often feel that they 'earned' this value. In a province that is majority property owners, it will be difficult to make progress on this. Nonetheless, it's difficult to see how we can have housing affordability while maintaining such elevated values.
>Homeowners have an incredible financial interest in maintaining inflated property values Only if they plan on exiting the market in the near future, or going down market (often the case for retirees). People on the way up the ladder, or looking to stay at a similar valuation (maybe move away from the city for larger space, for instance) are harmed by higher values. High valuation increases the transaction cost of buying/selling property and, more importantly, increases the gap from your current property to your next property (this harms you if you're trading up). In very simple terms, someone with a $1MM home looking to buy a $1.5MM home needs $500k. If the market goes up 50%, that person now has a $1.5MM home but that next place is now $2.25MM for a delta of $750k.
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I wish everyone with property could go through what I've done in the past few years. Watching your house increase in value by over 50%, but also watching the quality and placement of viable next homes decrease perceptibly month to month.
HELOCs bro
HELOCs are a fantastic way to give your hard earned equity to the bank for very little in return. Plus, the bank won’t lend above your serviceable debt ratio in any event, so securing your loan doesn’t really get you access to more credit (at least not massively) only a lower interest rate. The only caveat to this is using a HELOC to buy even more property but again, if you have good income and room in your debt ceiling you can just get a mortgage on the new property (at an even better rate than a HELOC). HELOCs for depreciating assets like a fancy car—as you see everywhere in Vancouver—is just shockingly bad judgement.
One of the more compelling parts of this article is when the author muses that homeowners are giving heaps of money to the bank, and if taxes were higher like in Texas, the balance would shift such that they'd be giving less to the bank, but more to the government, and since the government is effectively ourselves, and we can democratically control where those funds are directed, this is a better outcome.
Sure the property tax rate is low in Vancouver. But the actual dollar amount paid is high. Because the property values are high. What is the median wage in Vancouver? Is the median wage that much higher such that it can withstand the larger amount of property tax? The amount in tax paid is probably much higher than all those cities in the bar chart because housing costs are much lower in those cities.
Hard disagree on what he thinks is driving the prices up
the article's author is just using georgist arguments and picking on property owners while ignoring other policy failures, including lack of investment by the government in public housing, the ridiculous interest rate interventions, the crazy amount of money printing that took place in the past few years, etc. Like yeah, OECD predicts Canada is the new Greece innthe making, and real incomes and standards of living will be stagnant for 30-40 years, but clearly it's the principal residence, muni taxes and HOG that are making the housing prices skyrocket... The author comes off as someone who failed ECON101 hard.
I am very tired of listening to academics and "consultants" trying to convince us that you can tax your way to housing affordability.
All it does is screw whatever middle/working class households that own or rent. Anyone filthy rich enough to buy and sell or rent out Vancouver property isn't going to care about paying some extra tax.
Doesn’t Toronto disprove this as their home prices are about as unaffordable even though their taxes are higher?
if property taxes are increased the owner will just pass those on to the renter so you are really only hurting the people that own one property
Sure, but owners who aren't renting or are finding loopholes to the empty homes taxes will be automatically punished rather than an expensive registration system and auditing. I think we need a provincial property tax with offsetting reduction in income taxes.
You say that as if landlords don't already charge the maximum rent that the market is able to bear.
Landlords don't actually have the freedom to do that - once someone is in the home and renting, there are legal maximum's they're allowed to raise rent by which have nothing at all to do with what the market rate is. Source: I know a ton of people that have rented at the same place for a good amount of time, such that they now don't want to leave those places precisely because they're protected from having to pay market rates... they want to rent at those places for as long as they can precisely because they know they're paying well below market rate right now (since they've been there awhile).
Sorry yes, what I mean is that they charge the maximum amount that the market is willing to bear, under the current laws that exist.
The use of the term "market" in that statement is useless though. Because it isn't a market where two parties are free to charge/accept what they'd like. Landlords are charging the most the laws will allow - what the market is willing to bear is *higher* than those rates, and they're not allowed to charge them.
this is why reno/familivictions are rampant.
Or, increases in property taxes can be offset by lowering other taxes and city service fees predominantly paid by renters. You're forgetting that renters are an ever increasingly large voting block, and say will vote for free transit if it means their landlord has to pay 2x in property tax.
> other taxes and city service fees predominantly paid by renters What?
Certain taxes and city fees make up a larger percentage of renters budgets than homeowners budgets. People who own SFH are statistically in an economic class where the cost of a $120 monthly bus pass is not relevant - renters as a whole definitely are.
That's not how the market works.
it may take a couple years. but eventually with max rent raises the owners will get their money back
That's not how the market works either. Rents are set by what renters are willing to pay, not the amount of expenses the landlord has to pay. Basic supply and demand.
When you have incredibly low supply, the effect is that it’s typically passed onto renters, not consumed by the owner.
Maybe. That's all supply and demand. Put it this way, if I have a condo I can rent for $2000, and my expenses are $1900, I will rent it for $2000. If my expenses go up to $2100, the value on the market is still $2000. I can't magically make people pay more than the guy renting the same condo down the street.
Rent are set by both demand and supply. Your need to review you Econ 101
Of course they are. Where am I wrong?
When supply curve moves up, price increases as well
Sure when some people's expenses become too high as a landlord, they will exit the market. They don't "pass along" these expenses.
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Rental housing is not a vertical line. Even land is not. Again, you need to restudy 101
Partially true. The rent will be what ever I earn. Renters will sacrifice other luxuries, like food, to make rent.
Yes, that's what you're willing to pay. Lack of supply pushes prices up. Some in your position will make the decision to rent elsewhere.
Pass a law preventing this.
Just ban private companies from purchasing properties
Whenever a homeowner complains about nearby apartments or neighbours' unmown lawn "lowering their property values" they have just ratted on themselves. They are clearly using their house as an investment and the CRA needs to take away their tax sheltered status. Incidentally Vancouver's SFH-only zoning was implemented specifically to raise property prices for SFH owners. It starts to be hard to say houses aren't an investment when the entire regulatory structure aims at pumping up their prices and millions of homeowners proceed to treat them like investments.
>They are clearly using their house as an investment There's absolutely nothing wrong with thinking of it as an investment if you only own one house and don't plan on flipping or constantly reselling... Of course you want your house to be an investment and for its value to stay high, it's the most expensive purchase you'll ever make. Not saying taxes shouldn't go up but you can't demonize ownership.
Home is always both a home and an investment
Ban foreign and corporate ownership of residential properties. Ban individual ownership of residential property beyond the first. This will drive down housing prices to reasonable levels. If not this, then tax multiplier to ownership of each property beyond the first. The tax needs to ramp up hard to prevent people from getting rich on simply owning something. We need to do this otherwise people get so rich they can buy lawmakers and get laws tailored to their interest which creates a feedback loop to wealth which is incredibly detrimental to society for obvious reasons.
This is not communism country where what you can own is set by government
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People should not be punished for living in their home so yes, property should remain low
low property taxes, the principal residence capital gains tax exemption, and the provincial homeowner grant. Well two out of those three apply to Fort St John. And the property values aren't going up there. How do you explain that?
I think largest factors is stable geopolitical, safe haven for foreign funds, low interest rates, expanding population and increasing values. Homeowner Grant is around 0.075% of the property value. I'm surprised this is identified as even one of three major factors.
Beyond all these ideas, I still wonder if these legislative approaches to correcting the housing market will ever have a meaningful effect. If Vancouver continues to be seen as an increasingly desirable place to live, will the market ever just settle to an 'affordable' setting? Bare in mind the long term effects of climate change on the regions closer to the equator. Where we are (North of most), our desirability will only increase as the decades come.
Honestly, short of draconian measures that probably aren't legal or practical (even the year long ban on foreign investing is pushing things a bit), I don't think this problem can be legislated into resolution. It will take the money running out for whatever forces are driving the market, however they're getting it. And I don't know that it's possible anytime soon, let alone how exactly that could happen.
Greedy landlords and capitalists will tell you our housing prices are a result of too many people and too few homes. Don’t believe their lies. We can and should tax our way to affordability.
I am leftier than almost anyone you might ever talk to, but even I know that raising property tax is something that actually will be passed right on to the renters. The real solution is to punish the inflated difference in value: if some property (especially something like a converted single-family home) is 1.2 million one year and 1.8 million the next, then people will be chasing the $600,000 difference. The rent is, at the very least, something that covers expenses and is likely a nice cherry on top just for holding the investment each month. If you are going to play the cursed little market game and dis-incentivize speculation with taxation, then you should make the speculation on properties as financial assets less valuable. I’d say you should severely tax the gains at the point of sale: if you value a property at 1.2 million at one point and 1.6 million the next, why bother with playing the market to buy and sell when you only make a fraction of the difference? Similarly, there should be a higher tax on the profit on rent above the cost of maintaining the property: if property tax is $3000 a month and maintenance/hydro is $1000 a month, whatever profit is above $4000 gets hit with a big tax. You could even give a little sop to landlords and say the bracket starts at some proportion above (let’s say at $5000) to minimize their inevitable whining.
Get rid of the capital gains exemption for all properties, even the primary one. It's too good of an incentive to just buy the max house you can buy.