CMHC-backed report calls for surtax on $1M+ homes

One solution to surging home prices in Canada may be to implement an annual progressive surtax on homes valued at $1 million or more, the report suggests.

One solution to surging home prices in Canada may be to implement an annual progressive surtax on homes valued at $1 million or more, a new report suggests.

The report, authored by Vancouver-based advocacy group Generation Squeeze and backed by the Canada Mortgage and Housing Corporation (CMHC), said the surtax should be capped at one per cent and be deferred to when the home is sold or inherited to limit risks to homeowners with limited income.

The report also suggests any interest rate charged on the deferred tax payments should be comparable to market rates.

“The proposed annual surtax will reduce the tax shelter that incentivizes Canadians to rely more on rising home prices as a strategy for savings and wealth accumulation than they otherwise would,” said the report, which was released on Wednesday.

“Reducing the tax shelter will disrupt feedback loops that fuel rising home prices.”

The $1 million threshold was chosen because the tax would then only apply to nine per cent of households in the country, including 13 per cent of Ontario homes and 21 per cent of British Columbia households, according to the report.