New Idea: Housing Wealth Taxation?

Judy Lindsay Team News

New Idea: Housing Wealth Taxation?

May 27th, 2016

They're always trying to tax the rich to feed the poor, but now there's a new idea coming to light about property taxes and how to deal with the rising bills. The idea behind this new taxation plan is that the property taxes are tied into the equity you have in your home, rather than the house price. Why has someone come up with this idea, and why has it even been shared in the media? Sounds like those of us who are sitting in equity will gain to lose. True, those who have equity in their homes will end up paying more than those who have just bought their homes, which doesn't really sound fair to the ones who have worked hard to pay off their mortgage. However, the reason this idea has popped up is due to the rising housing prices in cities like Toronto and Vancouver. We've known for many years now that housing prices in Toronto and Vancouver are ridiculous at best, while we sit here in Winnipeg with our moderate growth and balanced markets, drinking our slurpees and slapping away the mosquitoes. Sure, you could make great fist fulls of cash if you sold your home at the right time in those markets. Let me repeat: at the right time. Home Buyers that are looking to buy into those markets are facing challenges: move away from the downtown core and cities to surrounding towns and cities to find a home that they can afford, having to quit their job and start over; or sink themselves into huge debt and hang on until they can pay those mortgages off; or really ask themselves if buying a house is important, and continue renting. What this housing-wealth taxation does for those that are trying to buy into a hot market is let them pay property taxes that don't keep rising with the housing prices, and instead, rises with the home equity. This can let new buyers jump into a market without having to worry about soaring housing prices AND soaring property taxes.

A lot of people can't afford to start saving for retirement (I'm talking about those ones that are already in their 30's, not just starting out in their early 20's), save for a house and pay off debt. And, a lot can't do so because they're spending frivolously on items that they think they need right.this.second. But, a lot of them aren't. A lot are working two jobs, saving 10%, or more, per paycheque and are living within their means. And, they still can't afford these rising housing prices. Toronto saw an increase of 30% in property values since 2012. We can compare this to Winnipeg, which actually saw a fall of 2.26% in housing prices from 2015. Winnipeg is a great city in the fact that housing prices steadily rise, and are now balancing out. Sure, we had our fair share of bidding wars going 20,30,40 thousand over asking price (which once stopped, contributed to the 'drop' in housing prices), but it's nothing compared to those homes in Toronto that are complete gut-projects going for 60-80 thousand over asking price and hitting nearly the one million mark.

A housing-wealth taxation may make sense in Toronto (we'll see how those with equity sitting in their homes feel about that idea), as it can help get those next in line ready for the future. But, here in Winnipeg? Property tax increases here in Wininpeg have always been a loaded subject. But, when comparing to other cities, we can rest a little easier. We have the lowest property taxes in Canada, and our housing market stays relatively balanced. Small bit of reassurance when it comes time to pay our taxes, I know.