Removing the principle resident capital gain exemption wouldn’t help anyone without a home buy a home, it would just hurt people who already have a home. Also, capital gains aren’t realized till you sell, so again not really helpful.
The way to alleviate the issue is implement a progressive property tax on second homes. Each home beyond the first has a 100% increase in property tax for every home besides the primary residence. 2 homes: 100% increase, 3 homes: 200% increase, etc.
Housing shouldn’t be an investment, but punishing people who have only 1 house is the wrong way to go about this.
It’s definitely fucking shitty, and you are absolutely right that it doesn’t punish the people responsible OR help people priced out immediately. Don’t get me wrong. But it’s ultimately going to be one of the tools needed to pop the bubble. Your capital gains statement, is the key to how it’ll work. It’s going to hold quite a lot of people from selling is what its going to do. It’s going to be one of the elements to stall the market. And that’s what’s needed to start spilling through the system. If it holds off folks from buying/selling and pumping up the market, it’s going to stop the cycle. If you were hoping to sell your house that you bought for $300 at $700 in this crazy market, it’s going to wipe out probably $70-$100k right off the top that you were going to spend on your new house, because that’s now less money you have in your pocket. While this sounds minor at a micro scale, think about the effect of this at a macro scale + the fact your new mortgage will be at about 5-6% higher interest, which is also going to erode both borrowing power and will to borrow. We are talking about probably $200k of impact here for some, if not more (depending on personal situations). Especially in light of the financial conditions of general Canadians at the moment, that will likely be enough to remove a material amount of participants from the marketplace, because that $400k gain you were hoping to captialize on, in your move up, has now been severely eroded.
It also will hopefully stall the Toronto/Vancouver retirement plans, where the boomers who have capitalized on an ever rising marketplace, will suddenly be facing a big tax bill on the ol’ dump and downsize plan. It cuts a lot off the top, so hopefully giving these folks some pause. If they are suddenly looking at a $200k tax bill, it might cool their jets a bit too. Which in turn would take a bite out of the market they were looking to turn to, as a result. Won’t be every case, but it would likely remove some from entering the market.
It isn’t perfect, and it won’t solely cause the cycle to stop, but it’s one of the tools that could be (and arguably should be) used. For everyone else, they can easily get themselves out of this tax issue they unfairly face, by remaining put where they are. Hence taking even more heat out of the market.
Your property tax bill is kind of a neat idea by the way. I don’t know if it would be effective though, because property taxes aren’t generally high enough to cause pause. A 100% property tax increase on my house for instance would only remove another $4k from my pocket. Don’t get me wrong though, an out of the box tax solution like this will be needed to keep the prices surppressed, once the market pops. That and just an outright ban on HGTV, which while I have no actual objective proof, is I believe also responsible for the bullshit situation we find ourselves in.
Removing the principle resident capital gain exemption wouldn’t help anyone without a home buy a home, it would just hurt people who already have a home. Also, capital gains aren’t realized till you sell, so again not really helpful.
The way to alleviate the issue is implement a progressive property tax on second homes. Each home beyond the first has a 100% increase in property tax for every home besides the primary residence. 2 homes: 100% increase, 3 homes: 200% increase, etc.
Housing shouldn’t be an investment, but punishing people who have only 1 house is the wrong way to go about this.
It’s definitely fucking shitty, and you are absolutely right that it doesn’t punish the people responsible OR help people priced out immediately. Don’t get me wrong. But it’s ultimately going to be one of the tools needed to pop the bubble. Your capital gains statement, is the key to how it’ll work. It’s going to hold quite a lot of people from selling is what its going to do. It’s going to be one of the elements to stall the market. And that’s what’s needed to start spilling through the system. If it holds off folks from buying/selling and pumping up the market, it’s going to stop the cycle. If you were hoping to sell your house that you bought for $300 at $700 in this crazy market, it’s going to wipe out probably $70-$100k right off the top that you were going to spend on your new house, because that’s now less money you have in your pocket. While this sounds minor at a micro scale, think about the effect of this at a macro scale + the fact your new mortgage will be at about 5-6% higher interest, which is also going to erode both borrowing power and will to borrow. We are talking about probably $200k of impact here for some, if not more (depending on personal situations). Especially in light of the financial conditions of general Canadians at the moment, that will likely be enough to remove a material amount of participants from the marketplace, because that $400k gain you were hoping to captialize on, in your move up, has now been severely eroded.
It also will hopefully stall the Toronto/Vancouver retirement plans, where the boomers who have capitalized on an ever rising marketplace, will suddenly be facing a big tax bill on the ol’ dump and downsize plan. It cuts a lot off the top, so hopefully giving these folks some pause. If they are suddenly looking at a $200k tax bill, it might cool their jets a bit too. Which in turn would take a bite out of the market they were looking to turn to, as a result. Won’t be every case, but it would likely remove some from entering the market.
It isn’t perfect, and it won’t solely cause the cycle to stop, but it’s one of the tools that could be (and arguably should be) used. For everyone else, they can easily get themselves out of this tax issue they unfairly face, by remaining put where they are. Hence taking even more heat out of the market.
Your property tax bill is kind of a neat idea by the way. I don’t know if it would be effective though, because property taxes aren’t generally high enough to cause pause. A 100% property tax increase on my house for instance would only remove another $4k from my pocket. Don’t get me wrong though, an out of the box tax solution like this will be needed to keep the prices surppressed, once the market pops. That and just an outright ban on HGTV, which while I have no actual objective proof, is I believe also responsible for the bullshit situation we find ourselves in.