Dear Editor,
Much has been said about the cost of housing. Little has been done to make home ownership more affordable.
The Bank of Canada raised mortgage rates. to help curb rising home costs. My member of parliament outlined the government’s idea that raising rates would lower house prices. It may be true that house prices are lower than they would have been if the bank had not acted, but the average person is paying more of their after tax dollars for housing, with a larger share of the payment going to the bank. Thus, it seems the government prefers the bank receive more money, the home seller receive less money, and the mortgaged homeowner (or renter) pay more money.
In September of 2021 the Royal Bank was advising “Policymakers should put everything on the table, including … the principal residence exemption from capital gains tax,” RBC senior economist Robert Hogue said in a research report in March. He later noted that this proposal was not intended to be a policy recommendation, saying it was “more of a theoretical exercise than a politically viable one.”
This idea was deemed political suicide. I think it bears further consideration.
Currently profits on a primary residence are exempt from capital gains tax. My neighbour paid $150,000 for her condo in 1993. If she sold today she would receive $450,000 in tax free profit. A small (let’s say 5%) capital gains tax would leave her with $427,500. The $22,500 collected from the tax could be reserved for building affordable housing. As it stands, she howled in outrage when a member of parliament even suggested this idea. It is unfair that homeowners benefit from a tax exemption, and renters do not.
Another friend pays 47 per cent ($2,400) of her income to her landlord. She does not receive any capital gains tax exemption. What if her rent payments were tax deductible? She would benefit at tax time, with no subsidy paid to the landlord. Suppose she is currently taxed at 30 per cent. At tax time she would have an additional tax credit of $8,640.
If she were able to make full use of a renters tax credit, through RRSP contributions, and tax free savings account deposits, she could accumulate $260,000 after 30 years.
I recognize this is still less than my neighbour’s windfall, but it would, at least address two aspects of our current dilemma: It would help renters save for a down payment or retirement, and it would provide a funding source for affordable housing.
If the problem is left to the government and the bank to solve through high interest rates, we can all expect to pay more for everything. We should look for ways to help each other, make this a better place, and stop being so greedy.
I applaud the government for the COVID money disbursement, however I find it may have been a bit naive to think Canadians would only take what they needed, instead of what they were entitled to. A family I know qualified for $10,000 per month, between dad, mom, and three teenage students who had part-time work prior to COVID.
The current high interest rate is partly the result of this emergency bailout.
Richard Penner, Langley City
.
• READ MORE: Housing crisis, affordability and COVID
• READ MORE: Economic forecast - B.C. headed for a slow year
.