Canada, Homeowners Are Not The Problem.

Disclaimer: as always, just an opinion. I'm not a real estate expert or anything; I read a lot and try to share facts that provide a desperately needed perspective.

So apparently, some people think that a new tax on real estate gains will solve a lot of problems and will somehow translate into creating new affordable housing. Here's how it goes:

The proposal, developed in a UBC Generation Squeeze Solutions Lab, was to implement a modest windfall-gains tax on high-value homes (over $1-million). This would be levied annually, but could be designed to be deferred, with interest. This is estimated to impact only 12 per cent of all households and impose a relatively small tax. It begins with a tax of 0.2 per cent on values above $1-million, peaking at one per cent for homes valued at $2-million and above. The first $1-million would be tax-free. So a home worth $1.1-million would require a surtax of only $200; at $2-million, the surtax would be $10,000.

The resulting revenues – up to $5-billion per year – could (LW: don't you love the "could" instead of "will" here) be productively used to help address the undersupply of more affordable housing, woefully underfunded in the National Housing Strategy.

That's not going to happen.

The lack of housing supply and affordability in Canada can be in good part attributed to:

• Complex and expensive planning processes, discouraging smaller projects and resulting in mostly large builders having the time and money to navigate these processes.
• Weird zoning that often prevents the creation of low-rise infill housing the country needs.
• The fact that real estate prices are skyrocketing at a significantly higher pace than nationwide earnings per household.
• And finally, because while our housing is often more expensive or is on par with some of the finest areas of the US, Canadians inexplicably make 30%+ less than their US counterparts on an apples-to-apples basis.

Seriously, check out the graph below. We have the highest housing price-to-income ratio in the G7. By far. In fact, home prices in Canada grew faster than incomes at over double the rate of the following country - since 2005!

The indexed value of the house price-to-income ratio for G7 countries, as well as the OECD average. Source: OECD; Better Dwelling.

So instead of taxing homeowners, why won't the government streamline zoning and planning processes? Or better yet, how about we focus on increasing Canadians' take-home pay instead of trying to compensate for abysmally irresponsible public sector spending by taxing everything that moves?

Another factor here is that the current party has painted itself into a corner, economic policy-wise. With our fairly obsessive focus on clean energy and clean energy alone, we insist on torpedoing our highly profitable natural resources industries, which are our #1 export.

For example, in 2019, Canada's top three exported goods were?energy products (worth $114 billion); motor vehicles and motor vehicle parts ($93 billion); and consumer goods ($71 billion). These three categories made up almost half of all exports.

These days:

• We are de-prioritizing and scaling down our energy exports.
• The US is slamming the breaks on incentives applied to vehicles produced in Canada. There is some hope though.
• Our consumer goods exports...are fine, I suppose. But are kind of besides the point.

Anyway, this deserves a separate post. But suffice it to say, we have many ways of making our country richer. It's just that we're seemingly choosing not to use them at every turn.