For someone whose home value increased by $500,000 inside of a year, you’d think Paul Kershaw would be jumping for joy.
Instead, Kershaw believes he and others like him should pay the piper – or in this case, the federal government – on an annual basis until he sells his home.
That thinking is part of an ambitious report released in early January by a group of 80 academics, economists, housing and health experts to tax the 10 per cent of Canadians whose homes are assessed at more than $1 million annually.
Entitled “Wealth and the Problem of Housing Inequity across Generations,” the report’s primary aim is to swing the financial pendulum such that earnings have some chance of keeping up with home prices.
A public policy professor at the University of British Columbia, Kershaw suggests a surtax that would ding homeowners on a sliding scale of between 0.2 to one per cent annually.
A $1.2 million home would owe $400, while a $1.5 million home would pay $1,000, for example.
“Just like offshore tax shelters motivate moving money out of Canada to preserve assets, we have in Canada a homeownership tax shelter that motivates everyday Canadians to bank on rising home prices to gain wealth,” Kershaw told Vancouver Is Awesome in a phone interview.
Under a best-case scenario, Kershaw sees the tax implemented by the federal government. His report suggests the tax could generate $5 billion annually to then be redistributed to affordable rental and co-ops, or expanded home care, long term care and child care.
Failing that, Ontario or B.C. – the two provinces with the highest national home prices – could go it alone. Kershaw notes that 21 per cent of people in B.C. live in a home assessed at more than $1 million.
“I don’t think there’s any senior government right now willing to take the political risk and say, ‘Yes, we’re going to do this right now,’” Kershaw conceded. “We haven’t yet created the political cover in society that allows politicians to be courageous enough to respond to the evidence that we have a dramatically widening gap between home prices and earnings.”
‘We need a bit of a tax shift’
To put that point in perspective, Kershaw paints a scenario where someone living in a $2 million home in Vancouver and earns roughly $60,000 annually pays about $10,000 in income tax, yet only roughly $6,000 in property tax.
“We need a bit of a tax shift,” Kershaw said. “Let’s start recognizing affluence isn’t just your earnings, it’s a combination of your earnings and your assets – housing being the most common and the most problematic right now.”
A Pitt Meadows resident, Kershaw said his home jumped in assessed value by $500,000 in the last year and he’s certainly not alone. Figures from the BC Assessment Authority suggest assessed values for single-family homes in Pitt Meadows increased by an average of 34 per cent.
It’s a consistent story the further east from Vancouver one goes: 45 per cent in Hope; 40 per cent in Chilliwack; 39 per cent in Langley and 38 per cent in Abbotsford.
When it comes to home sales in B.C. everything has shot up
The Fraser Valley Real Estate Board issued a news release Jan. 5 that backed those numbers up, noting that 2021 property sales shattered the previous annual record last set in 2016.
Year‐over‐year, sales of detached homes soared by 31.8 per cent in 2021 compared to 2020; townhome sales increased by 33.7 per cent and sales of apartments increased by 68.9 per cent.
BC Assessment deputy assessor Bryan Murao isn’t surprised by those numbers. He told V.I.A. in a phone interview that outside of a brief, three-month period at the outset of the COVID-19 in spring 2020, everything has shot up: sales, home viewings, competition, bidding wars, listings and just about everything else.
“The B.C. real estate market has kind of defied some economic fundamentals for at least a decade, probably two decades now,” Murao said. “Trying to predict it, I think it’s proven that we can’t really do that all that well.”
About two per cent of homeowners appeal their assessments each year and that appeal process begins Jan. 31. Those who’ve experienced damage to their properties as a result of last year’s extreme weather events are encouraged to contact the assessment authority.