I’m not usually the kind of guy who points out the follies of politicians. As a rule, I think they do a good job and work hard. But this week, City Council will consider asking the province to create a house-flipping tax. It surely is among the worst ideas I’ve heard in a while.
The motion says:
[The] explosion in housing costs is being fueled in large part by home speculators who are purchasing multiple homes and flipping them for huge profits. According to Teranet, an unprecedented 25 percent of all property sales in Toronto are now to land speculators (so called “investors”) up from 16 percent in 2011.
What’s with the “so called ‘investors‘” bit there? There’s nothing “so-called” about people who plunk down a deposit and fix a place up hoping to make some money. That’s just investment, and it’s a heck of a lot more real and value-creating than the kind I do on the stock market.
And we do tax house flippers. Sellers of investment properties (ones they don’t live in) pay capital gains income taxes just like other investors pay income taxes on the profits.
It gets even dumber:
Urgent action is needed to help stop the extreme increase in home prices in Toronto, driven by home flippers and land speculators who treat housing like a Bitcoin-type commodity.
Bitcoin, you probably know, is down 20% this month. It’s been a bloodbath. (No complaints from me.) But I sense that Mike Colle, the author of this motion, hasn’t been following the news—and probably wouldn’t really want to be held accountable for a 20% monthly drop in housing prices.
There are other, better ways to stem or reverse the increase in house prices. We could reduce demand, of course, by further taxing foreign buyers, making other parts of Canada more attractive to buy in, or increasing the levy on vacant properties.
We could increase supply with (thoughtful) rezoning and encouraging co-ops.
And, the single biggest thing that could be done is to increase the interest rate—which the Bank of Canada declined to do this week.
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