With the federal election less than one week away, Associate Professor Thomas Davidoff of UBC’s Sauder School of Business says there’s plenty the candidates could be proposing to help housing affordability in expensive cities like Vancouver and Toronto.
What should the future prime minister do?
To address high housing prices, which can make it difficult for renters to transition to home ownership, we should shift the tax burden from income taxes towards property taxes and taxing capital gains on housing. Because income taxes and property taxes are controlled by different levels of government, they will need to work together.
Higher property taxes will take resources from those who currently own very expensive homes while a corresponding drop in income taxes provides resources to renters and those who own less expensive homes. For political and equity reasons, it might be attractive to tax foreign homeowners at a higher rate, and tax more expensive homes at a higher rate. Luxury homes don't do much for most Vancouver residents; taxing them at a higher rate would redistribute resources in a way that most voters would support, and provide incentives for owners to support rezoning, so they could profitably convert their luxury homes to multi-family residences.
Is federal action entirely dependent on cooperation with provinces and cities then?
No - even before securing cooperation from other levels of government, the federal government can tax capital gains from home sales above a threshold level, as is done in the U.S., so that those profiting from selling a particularly expensive house don’t get a massive tax break just because it’s a primary residence. A hefty capital gains tax could discourage house flipping, so that speculators aren’t inflating house prices. The federal government could also provide incentives to municipalities that enact affordability-friendly policies.
What might those policies entail for mayors?
To address high rents, Vancouver and other expensive cities can ease zoning restrictions. For the foreseeable future, building more homes will result in lower rents and prices. Single-family homes are beyond the reach of most Vancouver-area voters, so it is not clear why so much of the Lower Mainland permits only this housing type.
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