The principal residence exemption has been a major contributor to the housing crisis, but eliminating it is easier said than done. A progressive surtax on high-valued homes may be more practical.
The progressive surtax would ideally not have a blanket threshold (such as the proposed houses-over-$1 million) across all jurisdictions, but would instead involve applying a formula that takes regional housing prices into account, so that it ends up targeting the wealthy and not inadvertently adding another stress to modest owners already struggling in an inflated area.
This is an important observation, Sherry. On one hand, the greatest wealth increases happen in the most expensive cities/regions. So that is precisely why we want the consistent $1 million threshold from coast to coast to coast. A consistent threshold is the only way to ensure the roughly 10% of households living in $million-plus homes pay a modest price on housing inequity, because there homes are so much more valuable than most others in Canada. Presently, the Home Ownership Tax Shelter is unfair to people in the Prairies and Atlantic Canada and even Quebec. More here: https://www.theglobeandmail.com/investing/personal-finance/young-money/article-home-ownership-tax-shelter-unfair/
On the other hand, having a consistent $1 million threshold for the surtax risks hurting first time buyers in those most expensive regions who will be taking on especially large mortgages -- meaning that their net-wealth is much less than $1 million. Alas, there are too many barriers and unintended consequences if we try to organize the tax based on "net housing wealth." However, we would recommend that the first-time buyer be exempt from the modest price on housing inequity for the first 3-5 years of ownership in order to partially address the concern that Sherry raises. Cheers and thanks for this important observation Sherry!
The progressive surtax would ideally not have a blanket threshold (such as the proposed houses-over-$1 million) across all jurisdictions, but would instead involve applying a formula that takes regional housing prices into account, so that it ends up targeting the wealthy and not inadvertently adding another stress to modest owners already struggling in an inflated area.
This is an important observation, Sherry. On one hand, the greatest wealth increases happen in the most expensive cities/regions. So that is precisely why we want the consistent $1 million threshold from coast to coast to coast. A consistent threshold is the only way to ensure the roughly 10% of households living in $million-plus homes pay a modest price on housing inequity, because there homes are so much more valuable than most others in Canada. Presently, the Home Ownership Tax Shelter is unfair to people in the Prairies and Atlantic Canada and even Quebec. More here: https://www.theglobeandmail.com/investing/personal-finance/young-money/article-home-ownership-tax-shelter-unfair/
On the other hand, having a consistent $1 million threshold for the surtax risks hurting first time buyers in those most expensive regions who will be taking on especially large mortgages -- meaning that their net-wealth is much less than $1 million. Alas, there are too many barriers and unintended consequences if we try to organize the tax based on "net housing wealth." However, we would recommend that the first-time buyer be exempt from the modest price on housing inequity for the first 3-5 years of ownership in order to partially address the concern that Sherry raises. Cheers and thanks for this important observation Sherry!