In response to the long-running home affordability crisis in Canada’s red-hot markets, any policy revisions on the federal level should focus on more fundamental solutions such as supply-side changes instead on the imposition of new taxes, according to the former Finance Minister.
Writing in a contribution piece for the Financial Post
, Joe Oliver argued that the growing calls to levy additional taxes are misguided, especially considering the ever-rising costs of living.
“The goal should not be to drive down house prices. That would penalize homeowners, lowering the value of some houses below their mortgages. It could also trigger an economic downturn,” Oliver said. “Policies should avoid impacting regions where price increases are moderate (that is, pretty much anywhere not in the Greater Toronto and Greater Vancouver areas) and where both domestic and foreign investment is needed to counter sluggish growth.”
“[The] last thing we need is for government to use a hyped-up crisis as an excuse to impose new taxes that would reduce housing affordability,” he added.
Contrary to the common perception that new taxes would curb foreign ownership, such a toll would instead hit already-disadvantaged sectors the hardest.
“Retirees on fixed incomes worry they may be forced out of their homes. For most millennials, buying a home where they grew up is out of reach without family support or a job running a hedge fund. Their sad fate is to rent indefinitely, purchase a minuscule condo, commute a great distance or try to find employment elsewhere,” Oliver wrote.
Fortunately, federal authorities have no shortage of viable alternatives that they can consider.
“CMHC can increase down payments for homes under $500,000. It can make credit standards more stringent, for example by ascribing a higher rate for fixed-rate mortgages,” the former Finance Minister said.
Oliver also pointed at increasing the existing housing stock as an effective solution, although he noted that it might engender no small amount of controversy.
“Five per cent of the 1.8 million acres protected by the Greenbelt could be re-designated for zero-emission development. Those 90,000 acres would permit construction of about half-a-million mixed-development residences, housing approximately 1.5 million people,” Oliver stated.
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