CMHC has vowed to collect additional data on foreign ownership, which will provide more information on the amount of offshore investors taking advantage of tax loopholes, according to one broker.
“Collecting more data is definitely a step in the right direction; some of the biggest social programs, such as welfare, are going to foreigners purchasing (expensive) Canadians homes,” Geoff Lee, a broker with Dominion Lending Centres
GLM Mortgage Group, told MortgageBrokerNews.ca. “There has to be more information on these (buyers’) assets.”
Referencing a 2015 study by University of B.C. geographer Dan Hiebert, which found that approximately 25,000 households in Vancouver declare less income than the money they spent on their housing costs, Lee said many affluent offshore buyers remain in their home countries and send money to spouses living in Canada who also collect social security programs.
Hiebert’s study found nearly 60% of homeowners in one designated low-income neighbourhood, Shaugnessy-Arbutus Ridge – which is home to many million-dollar mansions--, are foreign born. The neighbourhood is considered low-income due to the low incomes reported by residents, many of which live in luxury homes.
The also study found many residents in that and similar neighbourhoods – also home to luxury homes – pay low or no income tax and also collect welfare.
Speaking about the study, the Douglas Todd, migration writer for Vancouver Sun, wrote “the tax unfairness caused by the growing phenomenon of mansion owners alleging poverty can be traced largely to Canada failing to catch trans-national migrants who refuse to report their total global income at tax times.”
CMHC has vowed to collect more accurate data on offshore investors. The Crown Corporation told Bloomberg Monday it has contacted FINTRAC, Canada’s financial intelligence agency, as well as Stats Canada in a bid to better track foreign investment.
“CMHC will measure the level of foreign investment by determining if the property is owned by a person whose permanent residence is outside of Canada,” CMHC spokesperson Karine LeBlanc told Bloomberg.
Lee says more data will provide the government with a better idea of just how many offshore investors are taking advantage of tax breaks and social programs.
“I think there needs to be some type of guidelines because there is a lot of foreign investment,” he said. “There are a lot of loopholes that need to be closed.”