Election debate fact-check: Does Trudeau want a tax on primary residences? – National | Globalnews.ca

Housing affordability, one of the top issues on the campaign trail, was once again in the spotlight on Thursday evening during the only English-language debate in the current federal election.

It was then that Conservative Leader Erin O’Toole raised the spectre of a re-elected Liberal government taxing the sale of primary residences.

“Mr. Trudeau, Canadians are worried you’re going to be taxing their primary home sales,” O’Toole said during the segment of the debate devoted to the theme of affordability.

“Your advisers have said it … it’s on page 14 of its policy book,” the Conservative leader said, speaking to Trudeau and referencing the Liberals’ election platform.

But are the Liberals really proposing to introduce a tax on the sale of primary residences?

Hardly. Page 14 of the Liberal platform speaks of establishing “an anti-flipping tax, requiring properties to be held for at least 12 months.”

A capital gain is a profit from the sale of an asset, such as a financial investment or a property. Canadians currently may have to pay tax when they sell assets like stocks or real estate at a profit, but not when it comes to their primary residence, which is exempted.

Generally, capital gains tax only applies to secondary residences such as vacation homes and investment properties.

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The Liberals’ anti-flipping tax appears to be aimed at curbing abuse of the principal residence exemption by requiring that owners hold in the home for at least 12 months.

However, Canada has already cracked down — to an extent — on home-flippers taking advantage of the current rules to skirt the tax on lucrative home sales.

When house-flipping first gained momentum, many people got the idea of living in the house they intended to flip so they could claim it as a principal residence.

However, “it didn’t take long before (the Canada Revenue Agency) CRA put the lid on this practice by imposing stricter requirements for primary residence designation,” writes Jennifer Gordman at Turbotax Canada.

“The intent at the time of purchase, number of purchases and sales, and the timeframe between principal residence designations are all considered when determining the exemption,” she adds.

Starting with the 2016 tax year, Canadians have been required to report basic information about the sale of their primary home on their income tax return.

The notion of taxing capital gains on a principal residence has gained attention as Canada debates ways to tackle skyrocketing real estate valuations. The national average home price rose by more than 30 per cent between July 2019 and July 2021, according to data from the Canadian Real Estate Association.

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Some have proposed extending the capital gains tax to primary residences as a way to slow down home prices growth or even bring down prices.

But a number of housing experts Global News spoke with earlier this year were cool about the idea.

One of the thorniest issues about taxing principal residence is that a principal residence is the biggest investment many older Canadians have.

“There’s an equity impact … especially for seniors,” Diana Petramala, senior economist at the Centre for Urban Research and Land Development at Ryerson University, told Global News.

The measure could also backfire for millennials, by discouraging older homeowners from downsizing and freeing up some of Canada’s scarce supply for larger properties, she added.

Broadly increasingly the current capital gains tax on non-primary residences would also “discourage all forms of real estate investment, not just flipping. For example, it would reduce the incentive to own long-duration rental property, which could work against much-needed rental supply,” BMO senior economist Robert Kavcic echoed in a report in March.