To tackle the scourge of housing unaffordability, older, wealthy homeowners need to get involved
Paul Kershaw Professor of Policy at the University of British Columbia’s School of Population and Public Health. He is the founder of Generation Squeeze, a think tank that promotes well-being and equity for Canadians of all ages.
I am 47 years old now, But I started Generation Squeeze when I was 36 years old. Its mandate was to address intergenerational injustice, and one of the first areas it looked at, unsurprisingly, was housing. I entered the metro Vancouver real estate market in 2004 – long before millennials. I bought a single-family detached home for $540,000, and my mortgage is still over $400,000 even though I’ve been paying it off for 18 years. Having said that, since the purchase, I have earned over a million dollars in stock. My partner and I have been able to make quite a few rhinos – and even some additional investment – in large part because of the financial gains we’ve made from home. At one time, our place had a lot of leaks and a shaky foundation, but now it’s just so charming.
The baby boomer generation had their beginnings at a more opportune time than me, but I’m still a poster boy for the good timing lottery, especially when it came to entering the housing game. There are plenty of young people who are as smart as me – and hard-working like me – who can no longer afford to buy. Some research by Generation Squeeze recently revealed that it could take decades longer than it took millennials to thrive to buy homes in Canada’s largest city. Why on earth would we tolerate this?
One of the best ways to tackle the epidemic of unaffordability is to target the country’s tax policy. People talk about housing inflation like it’s bad for everyone, but it makes a lot of landlords rich — and many of those gains are not taxed. In fact, our tax system has provided significant protections from the $3.2 trillion in additional housing wealth that homeowners have acquired since 1977. Meanwhile, younger demographics compete with home prices that are quickly outpacing their earnings, competing for scarce rents as rents rise.
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Our suggestion is to put a price on the houseInequality – specifically, a modest annual surcharge on homes worth over $1 million. This isn’t exactly a scary idea. Most of us already pay property taxes. What is different in our idea is progressive. For the 12 percent of Canadians whose home homes are valued at more than $1 million, we’re proposing a small tax — gentle squeeze — starting at 0.2 percent and peaking at 1 percent for homes worth $2 million and above. The owners will not pay any tax on the first million. If you own a $1.1 million home, frankly, it’s negligible: you’ll pay $200 annually. It can even be deferred, with a little extra interest, until the home is sold or inherited. We realize that some people are rich but monetary poor, and we want to avoid putting any additional financial pressure on these owners. In fact, this additional tax will not affect most Canadians.
By our calculations, this tax would raise about $5 billion annually across Canada—primarily in Ontario and British Columbia, where home prices were the most inflated and, therefore, produced the most wealth for the owners. And what should the government do with the tax money? We want it to be directed to purpose-built rentals and cooperative housing — or “non-profit housing.” Groups such as BC Non-Profit Housing Association Or a housing cooperative Canada already has plans for how to expand housing for people profits. The City of Vancouver has a housing plan for various income groups as well. These groups have a lot Experience what they lack is resources. Our proposal would develop these resources for them, and generate revenue that could support developers working with nonprofit housing providers so that it would be more convenient.Ties are sold at reasonable prices. we agreeShe points out that our $5 billion idea could finance 150,000 new homes in the course of one election cycle and build on that amount every year after that.
One of the biggest obstacles to progress is the Canadian real estate culture, tempting many of us to rely on rising home prices to boost our savings. Our current tax structure only encourages this mindset. The average Canadian is taxed more on their job income than million-dollar homeowners who earn as much as they do watching Television. (Even the United States, our closest neighbour, does not protect home ownership gains from taxes to the extent that Canada does.) This motivates many Canadians to want home prices to increase faster than earnings, eroding affordability for succeeding generations.
And our collective addiction to rising real estate prices distracts from intergenerational tension in our homeG system. Take the legend of lazy mileto obtain. If only they worked harder! If only they had fewer cell phones and lattes and less expensive breakfasts! Now compare that with the myth of the frail old. This fragility may be biologically real, but according to recent data from Statistics Canada, today’s retirees are some of the richest we’ve ever seen – and a large part of their wealth has come from housing. Nobody is saying that old people didn’t work hard; We’re just saying that hard work doesn’t pay off now as much as it did when they were young. We are asking the wealthiest members of the oldest population to invest in affordable shelter for their children and grandchildren.
I’m a researcher of politics by training, but for me, housing is no longer just a policy issue in Canada – even if our idea isn’t about it. What we really have is a high tolerance for intergenerational inequality. Solving the surcharge would require the Canadian government to double generational solidarity, and make housing, taxation and other regulatory measures work for everyone — regardless of their age.
Our poll data shows that two-thirds of Canadians support the additional tax, but You’d be shocked to hear how much resistance I’ve received throughout my career. I’ve even created an email folder exclusively for Angry Notes. What motivates me are the stories I’ve heard from young people whose futures are endangered because the current housing market is stacked against them. I’ve talked to women in their twenties who want to have children, but real estate prices interfere with their ability to start a family. I hear from immigrant children who say, “My parents sacrificed so much to come to Canada, and I’m not living up to the dream they dreamed of for me.” All I can tell them is that the game is rigged.
We can’t keep a housing market locking up young people while others are gaining wealth because they sleep in homes they bought decades ago. Our surcharge can help stop this runaway train. We need all Canadians to decide that housing has to be about finding a place to call home — more than we want it to be a way to get rich. Building Financial security by paying off your mortgage over time is a very good savingsings strategy. But we must not accept What is our current housing systemabling: a one-year windfall that far exceeds what a hardworking, decent-paid young man can save in a decade. This model only works for one generation.
This article appears in the August 2022 issue of Maclean magazine. Subscribe to the monthly print magazine here, or buy the issue online here.