Foreign buyers picking up 70% of luxury homes, but gov’t can address affordability: economist

VANCOUVER (NEWS 1130) – With foreign buyers making up 70 per cent of luxury home buys in Metro Vancouver in the first seven months of the year, a local economist suggests governments can do something to address the issue.

The figure comes from a new report from RE/MAX.

Raising property taxes and cutting income taxes could help address the issue of affordability, according to Tom Davidoff with the Sauder School of Business.

That would require co-operation from potentially all levels of government — municipal governments control property taxes, while provincial and federal governments are responsible for income tax.

“What can we do to help working people stay in Vancouver? Somewhat counterintuitively, we can raise property taxes and cut income taxes,” says Davidoff.

“Give people cash — more cash — and let them keep more of the cash they earn when they work in Vancouver, and ask for sacrifice from people who already own homes here. As long as prices are rising, an increase in property taxes is a small take from people who have seen such enormous capital gains and are so wealthy as a result.”

Davidoff suggests a progressive taxation approach which would see higher property tax increases for those with more expensive homes, and a lower tax increase for those with lower assessments.

“We’re at about a half per cent,” Davidoff says of property tax. “On luxury homes in Vancouver that really doesn’t make any sense at all. You could go to 1.5 per cent or two per cent, right? Think of the $20-million homes in Vancouver. What benefit do those offer the people of Vancouver? Why are we subsidizing them with such low property taxes? It’s really hard to understand.”

Davidoff suggests the issue of foreign ownership could be tackled specifically by giving tax credits to home owners to partially offset property tax increases only if they pay income tax in this country, although he notes he is not against foreign ownership in principle.

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