Housing Bubble II: The Quest To Build Enough Homes Where People Actually Need Them

[hipster duck]

Originally Posted by P'tit Renard

No one's arguing that Montclair is receiving 3x time the services of affluent GTA suburbs. That's a weird tangent to run off to.

But I seriously doubt Montclair's budget is addicted to and padded by LTT residential land transfer tax revenue and residential development charges to the degree GTA cities are. It's a conscientious choice by GTA politicians to saddle younger GTA with disproportionate costs by way of development charges.

and the fees just keep increasing:

Toronto is in the midst of a housing crisis. So why are the charges passed onto developers set to go up by nearly 50 per cent?
https://www.cp24.com/news/toronto-is...lipId%3D373266

You and I are in agreement there. If municipalities need more revenue, it should come on the backs of existing homeowners.

What I don't advocate for is to have most of the tax burden fall on property taxes rather than income taxes because that means that, inevitably, we have to shift the cost of some big, important services to society - like public education - on municipal taxpayers. Municipalities are small; most people can choose which city to live in in a metropolitan area more than they can choose what province or state to live in. Municipalities can also be uniformly rich or uniformly poor in ways that provinces or states rarely can. As a result you can create big winners and losers if the municipality is where much of an individual's tax money goes to.

[lio45]

Originally Posted by niwell

Worth noting that property tax systems vary considerably across the US. California for instance would encourage sitting on RE even more than ours due to assessment caps, even with recent changes to the grandfather clause in property taxes.

Correct. California has high-ish state income taxes and low-ish property taxes, compared to many other states. In other words, closer to the Canadian model.

California suffers from some of the same problems too: generational unfairness, exodus of high-paying jobs to places with lower income taxes, expensive real estate…

[lio45]

Originally Posted by hipster duck

You and I are in agreement there. If municipalities need more revenue, it should come on the backs of existing homeowners.

What I don't advocate for is to have most of the tax burden fall on property taxes rather than income taxes because that means that, inevitably, we have to shift the cost of some big, important services to society - like public education - on municipal taxpayers. Municipalities are small; most people can choose which city to live in in a metropolitan area more than they can choose what province or state to live in. Municipalities can also be uniformly rich or uniformly poor in ways that provinces or states rarely can. As a result you can create big winners and losers if the municipality is where much of an individual's tax money goes to.

I don’t see this problem as insurmountable. Municipalities are creatures of the provinces. Property taxes in ON could get tripled everywhere, with all the new income from property taxes going to Queen’s Park, while Ontario income taxes are simultaneously reduced by the same amount, for example.

[Build.It]

Originally Posted by lio45

Would “The Great Canadian Scheme of Great Canadian Enrichment” work for you? It would be my choice

Some more ideas:

"The Great Canadian Official Retirement Plan Thread"

"The Great Canadian Inheritance Thread"

"The Great Canadian Double-Your-Salary Thread"

"The Great Canadian Rich-but-Stuck Thread"

And my personal favourite:

"The Great Canadian Urban Camping Thread"

[whatnext]

Originally Posted by lio45

I don’t see this problem as insurmountable. Municipalities are creatures of the provinces. Property taxes in ON could get tripled everywhere, with all the new income from property taxes going to Queen’s Park, while Ontario income taxes are simultaneously reduced by the same amount, for example.

Where's the taxpayer going to get that kind of extra money?

[Truenorth00]

Originally Posted by P'tit Renard

No one's arguing that Montclair is receiving 3x time the services of affluent GTA suburbs. That's a weird tangent to run off to.

But I seriously doubt Montclair's budget is addicted to and padded by LTT residential land transfer tax revenue and residential development charges to the degree GTA cities are. It's a conscientious choice by GTA politicians to saddle younger GTA with disproportionate costs by way of development charges. Ultimately municipal tax revenue has to come from somewhere, and they've decided time and time again to jack up development charges to let them hold the line on property tax increases.

and the fees just keep increasing:

Toronto is in the midst of a housing crisis. So why are the charges passed onto developers set to go up by nearly 50 per cent?
https://www.cp24.com/news/toronto-is...lipId%3D373266

Yep. It's letting them book all that revenue in the current year that made it so attractive. Mandate that all development charges go into trust account or reserve funds and there'd be some better behaviour.

Personally, I'd like to see provincial governments swap some responsibilities with municipalities. It makes no sense that provincial governments do so much for roads and transportation, especially for a lot of local stops. And it makes no sense that provinces fund schools with property tax. Those should be swapped.

[1overcosc]

Originally Posted by Truenorth00

Conversion doesn't work like that. $700k is going to be quite affordable for the types of wages somebody who is 30 mins from midtown Manhattan would make. Meanwhile, my parents house at the edge of Scarborough is worth $1.2M and that's a 1h 15m commute to downtown Toronto, where the wages aren't nearly as generous as New York. Given lower income and sales taxes, higher property taxes are probably close to a wash.

For all their many policy faults one thing I do think the Americans have gotten right is having higher property taxes and lower income taxes & sales taxes. I think that's part of why American cities in similar situations to Canadian cities are often more affordable and why housing development in the US seems to be keep pace with growth better. Higher property taxes make land use less "sticky" and encourages redevelopment when circumstances change.

[lio45]

Originally Posted by whatnext

Where's the taxpayer going to get that kind of extra money?

Income tax reduction, that’s the idea.

Some people would benefit (the ones who have high-paying jobs) and some would pay more (the ones who have little income but lots of real estate), but the idea is to have it revenue-neutral. Reduce the tax burden of those who earn money, increase the tax burden of those who own real estate.

[1overcosc]

Originally Posted by niwell

Worth noting that property tax systems vary considerably across the US. California for instance would encourage sitting on RE even more than ours due to assessment caps, even with recent changes to the grandfather clause in property taxes.

I'd prefer development charges be severely limited and municipalities receive funding through the Province to accommodate growth, even if this resulted in higher taxation through other means.

I agree, and to add: I would have the province pay for this by adding a new provincial property tax (call it the "Growth Tax") similar to the existing provincial education property tax. The provincial education property tax in Ontario is calculated with a provincewide mill rate which means that areas with higher property values pay a much bigger percent of the tax than areas with lower property values. This is arguably unfair for education taxes, but for a "growth tax" to replace development charges it's perfectly logical: areas with higher land values need more housing, meaning they'd get more of the spending from the tax.

[niwell]

You could probably even replace Education Property Tax in Ontario with some sort of growth tax. As it stands less and less funding for Education actually comes from property taxes (I think it's below 30% now?) and school district funding is equalized across boards. As mentioned EPT is somewhat unfair to high assessment municipalities such as Toronto but a growth tax would make more sense.

[lio45]

Originally Posted by 1overcosc

I agree, and to add: I would have the province pay for this by adding a new provincial property tax […]

Yeah, that’s basically what I was pointing out to hipster_duck: there are realistic ways of taxing real estate values more, while still being able to use those funds at other-than-municipal levels of government.

That Montclair Township house discussed earlier, the $25k CAD yearly tax bill could easily mostly go to the coffers of the State of New Jersey which would then allocate funds for schools on a state-wide basis, for example. Just because it’s not exactly how it’s done over there today, doesn’t mean it couldn’t ever be done that way.

[someone123]

It never made sense to me that certain tax mechanisms were tied to certain levels of government, like the municipalities getting property tax while provinces and the feds get income. In the US, some municipalities have income tax, and in principle provinces or the federal government could assess property taxes too. It seems unlikely that optimal taxation rules just happen to align with the current system. Of course instead it's a legacy system where once some level of government gets one particular tax that's ratcheted up as a way to solve revenue shortfalls.

A lot of homeowners in Canada don't even cover the municipal service costs of their properties with their taxes. I think property taxes are too low and income taxes are too high, and it must have negative impacts on society to tax 50-something surgeons at 50%+ of their income while also giving them property windfalls. It obviously discourages work and encourages rent seeking.

[ssiguy]

Jacking up development fees is the very last thing we should be doing which is why Canada will never have affordable housing again and it is yet another example of how our younger population is being further taxed to subsidize the Boomers. Yes, property taxes should go up for existing owners but not by much as most are still paying off their mortgages and have little financial room left. These development fees are obscene but I do have some empathy for the cities as they have few options in terms of revenue generation, thank you Quebec.

What we should be doing instead of jacking up development fees or hiking current property taxes which hurts potential & current owners is instead focus on particular owners themselves namely multiple owners. A family unit should have the ability to own their own home and an extra home whether for income or vacation but after that they should be nailed straight to the wall.

Any person with more than 2 homes should have, quite literally, a zero added to their yearly property tax bill. These are not people buying homes to live in but rather to swap and this must end. This would force investment companies to ditch their properties bringing homes onto the market for people who will actually live in them. We would get rid of the BlackRock companies of this world as well as making money laundering in the real estate market less advantageous.

2 properties nationwide for any family unit and none for any business as there is no reason why any business needs residential properties and if they refuse to sell, crucify them in property taxes.

[P'tit Renard]

Originally Posted by lio45

I don’t see this problem as insurmountable. Municipalities are creatures of the provinces. Property taxes in ON could get tripled everywhere, with all the new income from property taxes going to Queen’s Park, while Ontario income taxes are simultaneously reduced by the same amount, for example.

Administratively it'll be very easy to implement, and may actually encourage less tax avoidance planning as the lower income tax rates lowers the value of tax loopholes/shelters.

Canada's inability to think outside of the box is Canadian exceptionalism at its worst, no different than this country's ideologically rigid approach to healthcare.

If you ran for office you'd have my vote, maybe finally we'll get some real change

[YOWetal]

Originally Posted by ssiguy

Jacking up development fees is the very last thing we should be doing which is why Canada will never have affordable housing again and it is yet another example of how our younger population is being further taxed to subsidize the Boomers. Yes, property taxes should go up for existing owners but not by much as most are still paying off their mortgages and have little financial room left. These development fees are obscene but I do have some empathy for the cities as they have few options in terms of revenue generation, thank you Quebec.

What we should be doing instead of jacking up development fees or hiking current property taxes which hurts potential & current owners is instead focus on particular owners themselves namely multiple owners. A family unit should have the ability to own their own home and an extra home whether for income or vacation but after that they should be nailed straight to the wall.

Any person with more than 2 homes should have, quite literally, a zero added to their yearly property tax bill. These are not people buying homes to live in but rather to swap and this must end. This would force investment companies to ditch their properties bringing homes onto the market for people who will actually live in them. We would get rid of the BlackRock companies of this world as well as making money laundering in the real estate market less advantageous.

2 properties nationwide for any family unit and none for any business as there is no reason why any business needs residential properties and if they refuse to sell, crucify them in property taxes.

It's not thought of this way directly but allowing property taxes to be deducted from income tax (Trump limited this but it still exists in the US) would acomplish that without having the same vindicitive tone.

A surtax on rental profits would also make sense.