Tax Gentrification / Gentrification Tax, 2018
by GTA (Gentrification Tax Action)
Tax Gentrification / Gentrification Tax, 2018 by GTA (Gentrification Tax Action)
This is a proposal to create a Gentrification Tax to make Toronto affordable for lower- and middle-income residents. The tax is designed to discourage house flipping and to direct real estate profits to the local community. A Gentrification Tax would tax any increase in the sale value of homes within the first 10 years after purchase, declining from 100% in the first year to 0% after year 10. Income from the tax would be used to fund local self-managed affordable housing in the form of land trusts and co-operatives.
The Toronto housing market is out of control. Rents and housing prices are out of step with what most Torontonians earn. In the last 10 years, apartment rents have increased by 28% and house prices have increased by 112%,1 while wages have increased by just 18%. This is making it unaffordable for middle- and lower-income residents to live in the city. The average bachelor apartment in central Toronto costs $1,200/month, yet a third of Toronto residents make less than $1,700/month; which means spending 70% of one’s income on housing alone.2 Just as rents are unaffordable, purchasing is also out of reach. The average price for a condo in Toronto is $498,000, yet the median salary in Toronto is $30,000. The maximum mortgage a bank will offer based on this salary is $190,000; the median earner would need a down payment of more than $300,000 to purchase this home.3 As property values rise in a neighbourhood due to gentrification, it is renters, not homeowners, who are vulnerable to displacement.4
Increase in property value is a result of many factors, but speculation is the most significant. Speculation turns housing into a financial asset, making money for a small number of people while undermining the function of housing, which is to provide shelter. In the Greater Toronto Area, there are 99,000 homes that have been left empty as speculative investments.5 As an example of this strategy, of the homes sold in Toronto in March 2016, 17% had been flipped within the preceding two years.6
Taxes focused on speculation have been implemented in different places in the past. The first wave of speculation taxes was implemented in the early 1970s. Vermont and New Zealand both applied theirs in 1973.7 Ontario’s Conservative Party under Premier William Davis implemented a speculation tax from 1974–1978^8^ and Washington D.C. Mayor Marion Barry instigated one from 1979–1981.9 Speculation taxes re-emerged in 2010 in Hong Kong.10 British Columbia implemented two new taxes in 2016, a Foreign Buyers Tax and a Vacancy Tax, and Ontario followed suit in 2017, implementing a Non-Resident Speculation Tax.11 Naming a tax a “gentrification tax” focuses the tax on the class character of neighbourhood transformation, bringing its effects on the ground into focus.
This proposed Gentrification Tax (2018) learns from these earlier experiments, differing from them in a number of significant ways.
1) It applies to all residential properties, including primary residences, so speculators can’t retreat into the primary residence market.
2) All its revenue is used to build or maintain local affordable housing.
3) This housing must be locally managed, in the form of co-operatives and or land trusts.
4) It taxes the increase in price, rather than the purchase price of the home, making it impossible for a seller to lose money on a sale.
5) It is graduated over a longer period—10 years—making its effects longer lasting and the potential income from the tax greater, in turn creating more affordable housing.
GTA is a group of artists, and designers (Kika Thorne, Sameer Farooq, Jane Hutton, Adrian Blackwell) who have formed a collective to campaign for a Gentrification Tax. Such a tax would redirect profits from house flipping to support local, community-controlled housing initiatives such as land trusts and cooperatives. Contact us on Facebook or gentrificationtax @ gmail.com.