It’s not working

Toronto’s new lefty mayor and her minions this week consider taxing parking lots. A new tax. Big one. The city figures it can pull up to $150 million a year from the hides of lot owners and drivers.

It’s a part of the war on cars, of course. Moreover, real estate’s in the crosshairs now. Be it residential or commercial, every level of government in the nation is Hoovering cash from those who own some. The net effect: property becomes more expensive to buy, to sell, to own.

In BC, as we told you, the lefty premier has launched Canada’s first tax on the gain a homeowner may realize when selling a family home. If you list within two years of buying, he says, hand over up to 20% of the profit. (This is in addition to a federal tax on any sale within a year.)

Said David Eby: “We don’t want people to be flipping homes. So if you own a home right now that you are planning on flipping, this is your final warning. This tax is coming in. Make that home available for someone, who is actually going to live in it. Make it available for a family, make it available for an individual who is looking for their first place to live.”

Such convoluted logic. The tax doesn’t create more housing. Listing because your neighbour turns out to be a moron is not a flip. Selling it – whenever – creates more resale inventory for “a family” or a person looking for “their first place to live.” The market offers greater choice and potentially lower prices through less competition when more properties are on offer.

It’s just a tax grab. Political optics. It fools the kids into thinking you’re actually doing something. And as we all know, Mills and Zs love nothing more than enhanced government involvement in their lives.

Extra taxes on parking lots, increasing the overhead of businesses still trying to shake off the pandemic, is stupid. Capriciously taxing people who need to sell houses within a couple of years on gains the market created, is stupid. So is taxing real estate people have purchased, owned, financed and carried because they don’t sleep there enough nights of the year. And yet that’s the case in Vancouver, Toronto, Ottawa and a clutch of other tax-hungry and myopic municipalities.

At 3% now, the levy is huge. That equals an extra $2,500 per month on a $1 million condo (plus property taxes, condo fees, financing charges and insurance) that you fail to bed in for at least 182 nights a year. Meanwhile there are 6,100 condos now listed on the resale market and 22,000 unsold new units in the GTA alone. So the ‘empty house tax’ has nothing to do with increasing inventory by forcing people to sell. There are oodles of places available. It’s just a tax grab.

Ditto for the 1% hit we’ve placed on non-residents who own property in Canada. Like the clergyman from New Jersey who has owned the house across the street from me for the past few decades. He spends five months a year there, subs at the local Catholic church so the priest can get some vacay days and is a good egg in the community. Now he has to pay $11,250 a year – extra – to keep the place he restored and rebuilt. No extra housing is being created. Prices have not dropped as a result. It’s just a tax.

We’re really slinging it at the Americans. On a Sunday two weeks ago the feds announced a total ban on non-citizens buying houses would be extended another two years. It’s totally political, since foreign buyers have been few and far between for years now, especially after places like BC and Ontario imposed withering taxes on them. But despite becoming officially intolerant, xenophobic and regional, Canadians have not seen real estate get cheaper. The opposite. It was theatre, not policy.

And just imagine if the Yanks did the same to us. What if a new president, who might be isolationist, protectionist and America-first (guess who?) were to ban Canadian buyers? Or put an equivalent 1%-of-appraised-value recurring tax on all the snowbird homes in Arizona and Florida?

Then there are new taxes on assignment sales. And the effective tax hike on short-term rental income as expenses are rendered non-deductible in places where Airbnb are banned. As an analyst pointed out the other day in the Financial Post: “This could result in situations where short-term rental owners — who are often trying to simply eke out a living or get a return on their properties despite prohibitions on operating in their municipality — are worse off than, say, a drug dealer who is tax compliant, since such criminal receipts are indeed taxable and there is no explicit prohibition on the deduction of their “business” expenses.”

The point is simple. None of this stuff has reduced the cost of real estate. In fact, the opposite. Now property taxes are rising everywhere. Land transfer tax rates are being increased. Governments are mulling new wealth taxes based on unrealized capital gains and the market value of unsold real estate. We have flip taxes, proceeds taxes, occupancy taxes, spec taxes, underutilized taxes and taxes that pummel, repel and piss-off non-locals.

Nothing worked.

Maybe it’s time to withdraw support from those bereft of common sense. We’re out of control.

About the picture: “Yours is the only blog I read religiously every day,” writes Dale, in PEI. “I thoroughly enjoy your take on housing, the economy and the markets and really love the pet pix.Meet Milo, our son’s three year old Aussie Cross: smarter than me, will herd anything that moves and the world’s most loyal companion. Also because he hasn’t met a toy he couldn’t rip apart known as Milo the Destroyer. Thanks for all your work.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.