this post was submitted on 11 Oct 2023
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The housing crisis is not just a supply issue. Here are two solutions to fix demand (www.theglobeandmail.com)
submitted 1 year ago by sbv to c/[email protected]
28 comments fedilink hide all child comments
 

People are finally talking about shifting income tax to take some of the money out of the housing market:

First:

a lifetime cap of $1-million on the personal residence capital gain exemption [...] would limit unproductive investment in the real estate sector by discouraging retirement strategies based on the gains made from selling a house. It would also stop the investment strategy of buying a house, renovating, living in it the minimum amount of time to claim the tax credit and then flipping it for a tax-free gain.

They note that the lifetime cap wouldn't hit most Canadians in lower-cost communities. It should mostly hit higher end houses and higher income taxpayers.

Second:

a limit applied to the amount of interest that can be recorded as a business expense for single-family residences let as rental properties

They're suggesting these changes because

investors are the fastest growing mortgage segment with a 30-per-cent share of mortgaged home purchases nationally in the first part of this year, up from 19.6 per cent in 2020. They are now a bigger segment than repeat homebuyers and, over the past few years, have taken 6 per cent of market share from first-time buyers

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[–] [email protected] 1 points 1 year ago (1 children)

For example having a suite in a house usually doesn't cause capital gains to apply

To be clear, captial gains ALWAYS applies, you can just apply for exemption for personal use.

If you have you have a rental, suite that portion of the residence is not available for personal exemption.

This can be argued all the way up to almost a duplex level of "suite" in some cases.

Sure, you can argue it, but it's fraud unless it is a "relatively small in relation to its use as your principal residence." (Plus the other two criteria). If it doesn't share a bathroom and kitchen, it's definitely not "relatively small".

There's also demand from a strictly financial perspective.

Oui, puis non. There's certainly differences on decisions that people make, but the total amount of required rental + owned housing stock remains the same. There's some flexibility in rental stock, but that's a function of number of roommates people are willing to accept.

I don't expect the government to fix this problem anytime soon and if that happens at least there's even enough space for my kids to live here

I've just assumed my children will never leave, and hope that the situation improves enough that they can. Helps me sleep at night.

[–] [email protected] 1 points 1 year ago (1 children)

Your link to the rental suite capital gains part includes the exceptions that most people qualify for, including the relatively small part. "relatively small" usually just means less than half, and includes full suites just fine.
https://househuntvictoria.ca/2020/10/15/does-a-suite-risk-capital-gains-tax-a-professional-perspective/

[–] [email protected] 1 points 1 year ago

It seems clear from the language on structural modifications that are typically done to put in suites that the CRA could go after many suites for capital gains. Why do you think they aren’t, is it political?

I think it’s very political in nature and the sympathy on the other side is too strong. The reason you have suites in the first place is that properties are so difficult to afford, especially in our market. In addition we have a shortage of rental housing here and if you take housing away, that’s the opposite of what the federal, provincial, and municipal are trying to do here.

So the CRA is chosing not to enforce. That whole article was "what is my risk level of getting caught and assessed"

Cops not enforcing speed limits does not make speeding legal.