All’s fair in love and war… but what about housing?

We all care about being treated fairly. It’s part of our sense of justice and equality, and our intuitions about getting what we feel we deserve.

In conversations about housing, people on all sides of the debate claim to be defending what is fair. This isn’t necessarily a bad thing. Creating space to explore different instincts about fairness in our housing system is an important part of what it takes to create lasting policy change.

Thanks to a recently released Gen Squeeze report on housing inequity, arguments about housing fairness are heating up. That’s because our report uses the ‘T’ word.

Tax.

Talking about taxes on housing is a sure fire way to spark some heated debate in Canada.

The report recommends putting a modest price on housing inequity by adding a small annual surtax on homes valued at over $1 million. This Million-Dollar Homes Surtax would start at just 0.2%, and peak at 1%. The annual cost to an owner of a home valued between $1 and $1.5 million would be about $400. The surtax would apply only to the top 10% of most valuable homes across Canada. Or to put it another way, it won’t cost 90% of Canadians a penny more. But it will help ratchet down the runaway home prices driving up wealth inequity and crushing affordability for younger generations.

So is a Million-Dollar Homes Surtax fair?

Critics say it isn’t fair to people who have only recently managed to claw their way into overheated housing markets, and now have big mortgage debts. Why ask them to pay more when they have so little equity built up?

On the flip side, others claim that a million-dollar home surtax is unfair to people who bought homes decades ago. These homes may have shot up in value, but many of these owners weren’t trying or expecting to become millionaires. They just worked hard to put a roof over their heads, like everyone else. Why penalize their hard work now?

Another take is that a small surtax on the top 10% of homes isn’t fair because the people living in these homes have come to count on them to finance their retirements. You can’t pull the rug out from under them now, after all these years. Especially those living on lower or fixed incomes.

Yikes. Clearly there’s a lot to say about why putting a price on housing inequity would treat the owners of high value homes unfairly. But before you jump on board, let’s pause for a moment to reflect on what these claims have in common.

They’re all about the circumstances of those who ALREADY HAVE HOMES.

At best, that’s only half the coin. We also need to consider whether it’s fair that so many young people, renters, and newcomers to Canada are unable to afford a place to call home at all.

Out of control home prices are crushing affordability for those aspiring to enter the market as owners or renters. Skyrocketing homes values far exceed wages, pushing homes out of reach for what hard work can earn. Young adults in Canada’s largest cities have to work full-time for over 20 years to afford a down payment on an average home, compared to just 5 years in the 1970s. Hard work no longer pays off the way it used to in terms of being able to afford the major cost of living – housing.

Surely it’s unfair to sustain a housing system that is stacked against so many Canadians, and especially younger generations. So how can we sort out conflicting claims about fairness?

It’s absolutely true that not everyone who owns a million-dollar home enjoys the same level of financial security. Someone who owns a $1.5M home outright is not in the same boat as someone who owns a $1.5M home but has a $1M mortgage. But many younger Canadians would no doubt take either one of these boats over the leaking life raft left to those who are locked out of the housing market altogether.

It’s also true that there are regular folks living in million-dollar homes in Metro Vancouver and Greater Toronto who didn’t set out to become millionaires. In fact, I’m one of them. But hey, now that we’ve had the good luck to achieve this pinnacle of housing wealth by doing nothing more than living in our homes, is giving back a very small slice of this windfall really all that unfair?

Home owners have gained $3.2 trillion in added wealth since the late 1970s. We’re talking about a million-dollar homes surtax that maxes out at 1%, and applies only to the top 10%. It seems strange to invoke fairness as a defense for NOT sharing a little bit of the wealth gained while sleeping and watching TV with those who have been harmed by the system that bestowed this wealth in the first place.

It’s reasonable to be concerned about ability to pay an added surtax by those with low incomes who live in high value homes. But this is also so easily solved that we’ve already designed the million-dollar homes surtax to diffuse the risk. Gen Squeeze recommends making the surtax deferrable, meaning the cumulative total doesn’t have to be paid until the home is sold. ‘House rich, cash poor’ Canadians will never have to worry about affording this small additional annual cost.

So let’s reflect on what sounds worse.

Owners of the top 10% of high value homes worrying about whether a new tax might cost them between 0.2% and 1% of wealth over $1 million they already have?

Or most of a generation of Canadians locked out of a housing market that they can’t afford, no matter how hard they work?

Being house rich and cash poor may indeed be another symptom of our broken housing system, as runaway home prices generate ever-larger mortgages. But it’s a whole lot better than being house poor and cash poor.

All is not fair in housing. We need to be honest about who is suffering the most from the unfairness we have baked into a housing system that values investment returns from rising prices more than affordable and accessible homes. I don’t think it’s people like me living in million-dollar homes.