A new report commissioned by the Canada Mortgage and Housing Corporation (CMHC) recommends implementing a surtax on homes valued at $1 million or more as a way of tackling housing affordability across the country.
The report, authored by Vancouver-based advocacy group Generation Squeeze for CMHC, said the surtax should be capped at 1% and be deferred to when the home is sold or inherited to limit risks to homeowners with limited income.
The report also suggests that any interest charged on the deferred tax payments should be comparable to market rates.
The $1 million threshold was chosen because the tax would only apply to 9% of households in Canada, including 13% of Ontario homes and 21% of British Columbia households, according to the report.
Depending on how the surtax is structured, the report estimated it could generate between $4.54 billion to nearly $6 billion in revenue, which could then be put towards other housing initiatives that target renters and low-income Canadians.
The housing affordability crisis has worsened in Canada throughout the pandemic and is not expected to ease anytime soon, with RBC Economics calling the outlook for Canadian homebuyers “grim” in a December 20 report as rising interest rates further reduce buying power.
In its latest fiscal update, the federal government said any new housing measures would be unveiled in the upcoming spring budget. So far, the Generation Squeeze-authored report said that government initiatives have “proven insufficient to restore affordability.”
The report also recommends aligning the Canada Infrastructure Bank (CIB) with CMHC to incentivize lending to purpose-built rental construction. That would simultaneously help the CIB meet its investment targets and scale up affordable housing.
