Government intervention a taxing idea

Don’t do it. Just simply don’t do it.

This is the stern message from the Toronto Regional Real Estate Board (TRREB) for the federal government – if it is actually thinking about implementing a capital gains tax on primary residences.

You may have missed this little nugget of news, as Canada Mortgage and Housing Corp. (CMHC) quietly floated out the idea recently.

High degree of vulnerability

For CMHC, the national agency whose mandate is to “make housing affordable for everyone,” the thinking is that such a tax may cool what it believes are dangerously hot home markets.

In its latest Housing Market Assessment in late March, CMHC says Toronto has moved from a moderate to high degree of vulnerability, thanks mostly to price acceleration. Nearby Hamilton was already showing a high degree of vulnerability in its last analysis, and combined with Ottawa, the three largest centres in Ontario are all now in that category.

As TRREB and other experts are quickly pointing out, taxing capital gains on Canadians’ principal residences – an exemption enjoyed for decades – would be anything but a minor or effective adjustment.

TRREB is dead blunt about it. “The idea continues to be discussed in various corners,” says President Lisa Patel. “This should stop.

'Enough is enough'

“Imagine a first-time buyer who has been working hard to save a down payment for years and finally becomes a homeowner,” she adds. “This tax would change the rules on them midway. Many younger homeowners and buyers already feel like they have greater challenges than previous generations to become a homeowner, and now this would penalize them on the back end when they sell, something that previous generations were not subject to. For these homeowners, it’s a situation that seems unfair, to say the least.

“Enough is enough.”

Other experts are equally critical of the idea, saying there is no evidence such a move would actually deliver CMHC’s desired result.

(Last year, by the way, the agency predicted house prices in Canada would drop nine to 18 per cent over the oncoming year and a half. And of course, nothing of the kind has occurred in the GTA.)

CMHC says it will discuss the idea further in September, “to explore the question: How can we treat housing as a place to call home, rather than an investment vehicle?”

Imagine an economy, especially in these pandemic times, where Canadians couldn’t financially benefit as much from their years of homeownership.

Now that’s a taxing thought.