A tax on home equity would hurt Canadians during the best of times — but right now it would be reckless
Every so often, an idea comes along that is so out of touch and unfair that it unites pretty much everyone in their disapproval.
Recently, the Canadian Mortgage and Housing Corporation (CMHC) appeared to be doing exactly that when media reports suggested the federal housing agency is researching a new home equity tax on primary residences.
According to reports, CMHC is spending $250,000 in partnership with the University of British Columbia’s School of Population to investigate ways to tax the equity Canadians have gained in their homes.
CMHC has denied that a capital-gains tax on primary residences is in the works. But where there’s smoke, there’s fire.
A home equity tax would be unfair and hurtful to Canadians during the best of times, but at this very moment — during a global pandemic — it is reckless. Across the country, people have lost their jobs or a significant portion of their income and are struggling to make ends meet. For them, their home equity could be a lifeline during these uncertain times and beyond.
While the CMHC backpedalled from a home equity tax after the media uproar, they were clear that their goal is to level the playing field between homeowners and renters by making home ownership less attractive. Their research partner at UBC has been leading the charge for higher taxes on home ownership to make owning more equivalent to renting.
“Our ‘dream of home ownership’ is static and regressive,” CMHC CEO Evan Siddall said in a recent speech. “We need to call out the glorification of home ownership for the regressive canard that it is,” he said.
The Ontario Real Estate Association decided to ask people what they thought of a new home equity tax. It is adamantly opposed. According to a recetn Nanos Research report, more than six in 10 Ontario residents would oppose (50 per cent) or somewhat oppose (13 per cent) a new capital gains tax when someone sells their primary residence. Only 16 per cent liked the idea. For homeowners, more than 72 per cent opposed the CMHC tax grab on the value of their homes.
This is hardly a surprise. Homes are taxed enough as it is.
Hardworking Canadians already pay taxes on their income. They work hard to save what is left of their income to purchase a home only to pay a punishing land transfer tax when they finally get the keys. They continue to pay property taxes every year. They pay sales taxes when they improve their home and then get slapped with even higher property taxes for making it a better place to live.
Over time, homes build equity. For many, this is what they rely on for retirement or a rainy day. First and foremost, it is the family home and the place of our fondest memories. But it is also a safety net and a proven investment.
Recently, the CMHC has taken several opportunities to talk down the Canadian value of owning a home. This new ideology at the CMHC is contrary to its historic role of building a strong, vibrant Canadian middle class by supporting responsible and affordable home ownership.
The notion that governments can tax their way to housing affordability is ludicrous. Lowering the tax and red-tape burden on homes — especially for first-time home buyers — would be a helpful step toward affordable home ownership.
