Howestreet.com - the source for market opinions

ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

June 6, 2017 | The Empty Head Tax

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

 

Persian Gulf states have their knickers in a knot over Qatar. The Brits, bombed and battered, have a huge vote on Thursday. This week a punted FBI director could seriously wound a sitting President. And why didn’t I know about Ariana Grande until now?

Well, if you keep a balanced and diversified portfolio with global exposure, you actually don’t care about this stuff. But if you have a pied-à-terre in downtown Toronto or Vancouver, it’s time to start worrying. We all should, in fact. Canadian leaders are taking the first steps that logically  lead right to your unused basement or the bedroom little Raunchie just moved out of.

Less than a month now before Vancouver starts to tax the stuffing out of people with secondary residences – often small condos used part of the year or part of the week. The Empty Houses Tax law is historic and draconian. Unless you live in a property for 180 days as a principal residence, or rent it out for six months of the year in 30-day stints (no Airbnb for you), you’re nailed. The tax is 1% of the appraised value – or $500 a month on a typical $600,000 condo.

In Ontario, the same appears looming. In April the province ushered in legislation allowing municipalities to add this levy to existing property taxes for residences it deems are under-utilized. Toronto’s mayor, who used to be a Conservative and a free-enterpriser dude, is almost certain to do this – because it’s a popular move with the deplorables, who are now destined to run the world.

The argument in favour?

We have houses too expensive for average people to buy, which has placed big pressure on the rental market where vacancy rates are low, competition among tenants is stiff, and landlords are rentier bourgeoisie who should probably be gelded.

Says the Van mayor: “In a rental housing crisis, it’s unacceptable for so much housing to be treated as a commodity while people who live and work in Vancouver can’t find an affordable and secure place to live. Housing is for homes first, investments second. The Empty Homes Tax will help ensure the best use of all our housing, and boost long term rental supply by bringing thousands of homes back into the market.”

By this logic, of course, anyone with a house they live in full-time with an idle basement suite, or two empty bedrooms the kids used to occupy, is an equal target. Sadly the meme is out there that the EH tax will punish offshore investors who leave Westisde mansions vacant. How silly is that?

The argument against?

Lots of people have secondary homes they live in part of the time – like downtown condos used for business purposes every single week of the year. That makes them unrentable, of course. Besides, the owners pay 100% of the property tax yet consume fewer services. And by avoiding a long daily commute, they curb the car and reduce pollution. Moreover, as owners they paid land transfer tax, fork out condo or strata fees, look after utility bills and contribute just as much to the local economy as some moister tenant.

Toronto, by the way, is the financial capital of the country with thousands of Americans working there at any one time for cross-border corporations (just as Canucks labour in the south). Many of them find it cheaper and more stable to buy than to rent, so why should they be slapped with an Empty Houses Tax on a property that’s occupied full-time? If we want urban centres which compete internationally, attracting global investment capital, why are we acting like provincial dorks?

So, in reality, this is no tax on Empty Houses. It’s a tax on the affluent who can afford  downtown digs. It’ll probably do diddly to add new stock to the tenancy market, or drop a dollar from rents. It’s an assault on the right to own property which, as you can see, we don’t have. And it’s a sop to those who would like us all to be equal.

Yikes. What a mess that would be.

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the HoweStreet.com Weekly Recap.

June 6th, 2017

Posted In: The Greater Fool

Post a Comment:

Your email address will not be published. Required fields are marked *

All Comments are moderated before appearing on the site

*
*

This site uses Akismet to reduce spam. Learn how your comment data is processed.