A new report is urging Canada to consider a luxury tax on homes valued at over $1 million as a means to rein in surging real estate prices.
Home prices across Canada have skyrocketed over the past year, with month after month of record-breaking sales.
On Wednesday, non-profit advocate group Generation Squeeze released a report, funded by the Canada Housing and Mortgage Corporation, and in it, they recommended an annual surtax on all homes valued over $1 million. According to the report, homes at this price point make up just 9% of all homes, or 1,362,789 households in Canada.
In theory, the proposed surtax would reduce the tax shelter that reportedly incentives Canadians to rely on growing property prices as a strategy for savings and wealth accumulation. Since 1972, the report explains that Canadian tax policy has sheltered principal residences from taxation to help homeowners build wealth, but this has generated a “number of significant, unintended problems,” such as inflated demand and average housing costs.
The tax, as laid out in the report, would start at 0.2% and increase to 0.5% for homes between $1.5 and $2 million and go up to 1% for homes over $2 million. These taxes are estimated to bring in $4.54 billion in annual revenue.
The report noted that the government could use the collected tax to provide portable housing benefits for renters or other recommendations from the Lab, including investments in new green co-op and purpose-built rentals.
Generation Squeeze, who compiled the report with input from 80 experts, recommends that the tax be deferrable, meaning it would not need to be paid until the home is sold or the property is inherited. This would address any issues arising from individuals with limited income or whose home value is beyond their own wealth.