The efforts of various governments to control the rise in housing prices by reducing demand through tax policy has been of little avail.
In his report on Metro Vancouver housing titled Growing Pains, James Tansey, executive director, Centre for Social Innovation and Impact Investing, suggests that the best way for municipal and provincial governments to have the biggest impact on housing affordability is to reduce the time and cost of gaining regulatory approval.
Tansey points to rising property tax revenues as evidence that provincial and municipal tax policies are not working to reduce demand.
“If the goal of these polices was to cap or reduce housing prices, the most recent budget forecasts would show declining revenues over time,” said Tansey in his report. “All the taxes [related to housing] are projected to increase government tax revenue in the coming years.”
For example, the transfer tax levy, which was increased with the aim of reducing foreign ownership, is projected to generate 21% more ingovernment revenue by 2021. If the transfer tax was reducing housing demand, you would expect this tax revenue to decline with it.
Since taxes have not worked to reduce demand, Tansey asks what is the downside of significantly improving supply conditions?