The news media have been full of stories and hand-wringing about the high prices of homes in Vancouvre and Trono. From Lawrence Solomon [via Dr J]:
The Greater Toronto Area is heading into a catastrophic housing bubble, some experts warn, pointing to a raft of scary statistics, such as the sale of detached homes averaging $1.2 million in February, a 32.5-per-cent increase over a year earlier. In a panicked response to this possible crisis — the 2007 U.S. housing bubble is still fresh in people’s minds and some still shudder over Toronto’s 1989 housing bubble — politicians, planners and pundits are recommending everything from tighter lending rules, to a tax on purchases by foreigners, to subsidies for more affordable housing.
But one reason people are paying outrageous prices for houses in Trono is that apartments are taxed three times the rate of houses:
Unbeknownst to most tenants, their property-tax rate is three times that of homeowners since apartments are taxed at triple the rate of private homes. City councillors have good reason to turn the screws on tenants. For one thing, tenants don’t pay property taxes directly — these are buried in their rent, leading tenants to blame their landlords, rather than their councillors, for high rents. For another, homeowners are likelier to vote than tenants, largely because many tenants are immigrants who lack citizenship.
If the city taxed homeowners and tenants equally — or even better, if the city moderated the property tax through user fees that had homeowners and tenants paying a fairer share of the costs they impose on the city — home ownership would look much less the bargain to the tenant feeling pressure to buy a home. If city property taxes on businesses also reflected actual costs — rather than being raised to confiscatory levels to cross-subsidize the homeowner — home ownership would look like no bargain at all.
Renters are often under the illusion that it's the landlords who pay the taxes, not the tenants. But of course the rent must cover all the costs involved. Renters pay these high taxes, albeit via a pass-through operated by landlords. The high rents, caused in part by the discriminatory high taxes, induce more people to look into buying homes, thus driving up the prices of homes.
Quite honestly, I have no idea how young people with families live in big cities. I look for more companies to move to smaller cities to attract workers with shorter commutes and lower housing costs.