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Corporate tax breaks and loopholes in Canada have contributed heavily to the affordability crisis argues Silas Xuereb, researcher at Canadian for Tax Fairness, PhD candidate at University of Massachusetts, Amherst, and author of a new report entitled, How tax breaks are worsening Canada’s housing affordability crisis. Outside of calls to build housing supply, Xuereb draws attention to a lesser discussed issue within the broader debates in Canadian housing: financialization. Without tackling financialization, housing may very well remain unaffordable despite changing supply and/or demand.
Financialization refers to the process by which a commodity, like housing, becomes a financial tool for investment rather than remaining as social or human good. Xuereb points to Real Estate Investment Trusts (REITs) as the main driver of this transformative shift in the real estate market. What makes REITs so popular and effective is the tax system in Canada, which gives real estate investors tax breaks on housing investments as an apparent incentive to increase supply. However, despite a 700 percent increase in real corporate capital gains since 2002, these entities have pocketed most of the profits while prices go up and supply remains insufficient.
Closing the tax loophole is an important step in fighting rising costs, as a part of a comprehensive policy set that includes investment in non-market housing and caps on single-entity ownership of multiple dwellings.
Listen to our interview with Silas Xuereb on how the current Canadian tax system favours corporate landlords and what we need to do to fix financialization driving the housing crisis.
Notes:
- REPORT – How tax breaks are worsening Canada’s housing affordability crisis, by Silas Xuereb, Canadians for Tax Fairness, September 2024.
- REPORT – The Financialization of Housing in Canada, by Martine Auguste, Canadian Human Rights Commission, June 2022.
- “Addressing the Rise of Investor Ownership of Housing, Part 1: Assessing the Scale and Impacts across Canada” by Jeremy Withers, Perspectives Journal no. 1, April 2024.
- REPORT – Dreams and Realities on the Home Front: Canadians’ Call for Government Action on Housing Affordability, Broadbent Institute & Friedrich-Ebert-Stiftung, March 2024.
- Alternative Federal Budget 2025, Canadian Centre for Policy Alternatives, September 17, 2024.
