Opinion: Federal action needed on housing
Foreign investors: Funding and taxation regulations – even criminal laws – must be addressed
By Elizabeth Murphy, Special to The Vancouver Sun October 17, 2015
Canadian cities like Vancouver need federal policies to address housing affordability issues. South False Creek includes CMHC subsidized housing from before the federal program was cancelled in the early 1990’s.
Full edition below:
Although civic infrastructure has become a federal election issue, housing has not had the debate it deserves. The federal government has a significant role to play in housing affordability; in funding of social housing and other housing programs; in tax relief as an incentive to the private sector; and in regulations regarding immigration and investment.
Funding of social housing and other housing programs:
Only about 7% of the tax base goes to cities even though their citizens are primary contributors to the GDP. The federal government had a primary role in housing programs until the early 1990’s, at which time they cancelled the CMHC programs.
Social and co-op housing programs made economic sense. Rather than providing a public subsidy to slumlords, public funds went to pay off financing that eventually resulted in publicly owned assets. This was an investment in creating stable home environments for families and the most vulnerable in society while investing in the future. When we count the costs of reduced social impacts such as lower demand on health and judicial services there is a bargain. Most importantly, it is the right thing to do.
With the increasing economic stress to lower income citizens, it is more important than ever that the federal government restores funding for both subsidies on properties where current housing agreements are now expiring, and also to reinstating federal housing programs.
In addition to funding social and co-op housing, CMHC used to give grants to low income earners for upgrades to older housing for health, safety and energy efficiency through the RRAP program. If reinstated, this program would also help in climate change reductions.
Taxation as an incentive for the private housing sector:
Taxation policy can be used as a powerful tool to incentivise both rental and ownership housing options.
One of the most important principles of housing affordability is stability. The longer people own or live in a property, generally the more affordable it is and the more it creates resiliency through community support. However, current tax policies do not support this principle.
Many current income tax policies discourage the ownership of rentals. Rental income is treated for tax purposes as passive investment income so is taxed at a higher rate than is “active” income such as development. This creates a disadvantage to those owners who operate rental buildings over those who hold property for redevelopment.
This is the opposite of what should be happening. There should be income tax advantages to owning rental buildings and the longer the time frame the better. Generally, the longer a rental building is owned, the more likely that the mortgage will be paid off and there will be less pressure for owners to increase rents while allowing more income for maintenance. Every time a building is sold, the new owner will need to raise financing to cover the current value of the purchase and that will in turn need to be covered by upward pressure on rents. Therefore, long term ownership should be incentivised through tax policy.
Older buildings are also more affordable to rent or purchase than new construction by 25% – 50%. So tax policies should be made to incentivise retention and upgrade of solid older buildings, especially those that have character and heritage value. Continue reading