Two ways to fix the housing problem: tax it or get out of the way

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By Jay Goldberg and Carson Binda

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On housing, Ontario Premier Doug Ford is pursuing innovative solutions to an old problem, while British Columbia Premier David Eby is relying on his favorite, ever-growing tax bills.

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The Greater Toronto and Metro Vancouver areas frequently trade spots for the most expensive real estate in Canada. In both cities, the average home price sits at well over a million dollars. With potential buyers needing to offer a 20% down payment, it is nearly impossible for young families to break into the housing market.

In both the Toronto and Vancouver areas, the most pressing problem is housing supply. There are too many people who want urban homes and not enough available. That’s what sends prices soaring.

For too long, politicians have tackled the housing crisis with demand-side solutions instead of addressing supply-side problems.

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In both Toronto and Vancouver, governments have imposed foreign buyer’s taxes in an attempt to limit housing demand. But wealthy investors from abroad are unlikely to be scared away by a small additional purchasing tax. The cost of housing in Metro Vancouver has continued to rise since the foreign buyer’s tax was introduced. Taxes just don’t make housing cheaper.

Governments keep taxing, but housing supply keeps dwindling.

Ford seems to have recognized the perennial mistake.

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The Ford government announced its More Homes Built Faster Act, The bill introduces major changes to municipal zoning laws, allowing builders to construct up to three residential units per lot to help stimulate housing supply. It also ends municipal requirements restricting unit sizes and requiring more than one parking space per unit.

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According to the Ford government, these changes will leads to 1.5 million new homes being built in urban Ontario over the next decade.

By cutting down on the endless bureaucracy and red tape municipalities throw at builders and developers, the Ontario government is making a real effort toward real progress.

On the country’s western coast, however, the Eby government is making it harder for people to buy homes.

To Eby’s credit, he has recognized that red tape has stood in the way of addressing the housing supply issue in British Columbia. However, his cuts in red tape come arm-in-arm with higher taxes.

Having made several announcements on housing in his first few days in office, his plan relies on yet another factor that stands in the way of housing construction: taxes.

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Eby’s new Housing Supply Act would give the provincial government the ability to set housing targets for municipalities. It also allows the province to enforce targets on municipalities that fall short of the province’s objectives if extensive consultations with the municipalities don’t lead to real results. If Eby’s government takes community consultations seriously, then this has the potential to cut the red tape which is driving up the cost of housing in BC.

But Eby is also turning towards moretax. He has promised to introduce a new tax on homes sold within the first two years of ownership. Eby says the plan is designed to stop people from flipping homes.

Here’s the problem with that plan. There are 61,000 derelict housing units in Metro Vancouver alone. The provincial government should be encouraging people to turn these units into livable homes. As we’ve come to expect from the government of tax-happy BC government, it won’t actually tell us how much this tax is going to cost taxpayers.

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Eby’s plan on housing lacks ambition. Setting targets for municipalities is great. But if zoning laws stand in the way of construction, it’s unlikely that municipalities will meet provincially set goals.

Ford’s plan, on the other hand, could be a game changer. By allowing more housing construction on the same lot, builders will be able to finally address the supply shortages plaguing municipalities like Toronto. Vancouver could benefit from the same approach.

The government of British Columbia should take a page out of Ontario’s playbook. Eby should cut red tape in a meaningful way, as the Ford government is doing in Ontario. The province should be squarely focused on making it easier for developers to increase housing supply, not weighing them down with new taxes.

Jay Goldberg is Ontario director and Carson Binda is British Columbia director at the Canadian Taxpayers Federation

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