Last Monday, British Columbia premier Christy Clark announced a plan to introduce a 15 per cent tax on foreign real estate buyers in Vancouver. It’s part of a bid to make housing more affordable in an overheated market where dilapidated trash shacks routinely sell for more than a million dollars.
And since Toronto also has a strong real estate market – not Vancouver-level hot, but our trash shacks are still pretty pricey — it didn’t take more than a day before our politicians were looking at Clark’s tax and musing about jumping on bandwagon.
Ontario Finance Minister Charles Sousa said he’s looking closely at the tax. Toronto Mayor John Tory wouldn’t rule out supporting something similar in Toronto, though cautioned that he’s taking a wait-and-see approach.
But me, I’ve seen enough. This policy proposal is a waste of time.
It’s not that I don’t understand the political appeal. In these Trumpian times, blaming people from other countries for local problems is easy and fun. But urban housing affordability is a serious problem in need of a serious solution, and there’s little indication that taxing foreign buyers will do anything to really address it.
The reasons are many. Foreign buyers represent a relatively small percentage of overall home buyers – less than 10 per cent, by most measures. Challenges tracking these purchases — and the ability to buy through a proxy — will make enforcement of the tax a bureaucratic nightmare.
And, more importantly, what affordability problem specifically is this tax trying to solve? If the concern is that too many buyers are buying up properties purely as investments, neither living in them or renting them out, then why does it matter whether these buyers are foreign? Runaway real estate speculation is more effectively addressed with general increases to land transfer and property taxes.
Because the real fix is building more homes.
If that sounds simplistic, it’s because it is. Fundamentally, housing affordability is an issue of supply and demand. There are more people looking for places to live than there are homes.
In the face of this imbalance, the best thing governments can do is encourage more building. That doesn’t mean letting developers run wild, but it does mean encouraging widespread development of a range of mid-to-high density housing — a mix of badly-needed market rate rental buildings, dedicated affordable housing, old school co-op housing and (as much as hipsters like to hate on them) condos.
The issue with this approach is that, in our NIMBY-dominated times where even small condo proposals provoke furious letter-writing campaigns, this kind of large-scale development push would be unpopular. For politicians, it’s easier to play the blame game.
This post was originally published at http://www.metronews.ca/views/toronto/torys-toronto-matt-elliott/2016/08/01/instead-of-foreign-tax-build-more-housing.html on 2016-08-01T00:00:00.000Z