Hug a flipper

We know the muck is piling up in Ottawa. We know there’ll be an early election. We know who will win. But after that? Will houses become affordable and the kiddos stop whining and moaning?

Nah. Not without change. And so far both Libs and Cons have been rabidly barking up the wrong tree. The government has thrown heaps of money into a housing accelerator fund intent on blowing up local zoning regs and giving financing to builders. Poilievre has ripped apart ‘gatekeepers’ for making new homes more costly and says his team would punish cities that fall begin in housing starts.

As you know, so far, it’s all crashed and burned. Just like the exiting housing czar, Poor Sean Fraser. The pace of construction is glacial and with all these interest rate cuts, real estate values are starting to head even higher. There are bidding wars and offer dates in the big cities again, for Dog’s sake. Nothing’s worked.

So, time for new thinking.

A major thrust so far among all politicians has been to crush, punish and tax into oblivion housing entrepreneurs – those folks who have traditionally brought scads of refreshed units to market.

Think about it. This has been a war.

If a handy guy buys a crap house to fix up, makes it habitable and sells for a gain after taking a big financial risk, that profit is fully taxed as income. But if the same guy buys a REIT and sells it six months later for a profit, that windfall is taxed as a capital gain, dropping the hit by more than half.

If anyone in Canada buys a house, lives there for ten months, cleans it up and sells for more than they paid, they’re painted as a flipper. It’s like having Mpox. The feds tax the gain fully and in BC the punishment is ridiculous. A sale within two years means a sliding scale of taxation torture.

Somewhere along the way (thanks mostly to misguided lefties) those adding value to real estate have come to be seen as criminals. Even when they render housing batter, livable and renewed. It seems at a critical time when we’re told Canada is four million housing units short of demand, that we squish the talent we’ve already got.

As mentioned here a few weeks ago, in one region of the GTA these days fully 30% of the houses currently listed for sale are vacant. A large number don’t sell because they’re not family-ready. And – face it – manly carpentry, plumbing or electrical skills are in short supply at a time when most men tickle keyboards for a living.

So, Pierre the Ascendant, how about manning up with a better real estate strategy?

First, trash the anti-flip laws. Flippers can be good. The bulk of Canada’s housing stock is decades-old, substandard, leaky, energy inefficient and costly to maintain. Let entrepreneurs buy, restore and remarket it – then be rewarded fairly for the risk taken.

Second, change the tax laws. Homeowners who sit on a house and do nothing to improve it can get taxless profits. A flipper who sweats over making a home better and finances the process should at least be able to claim the profit as a capital gain – not taxable income.

Third, redirect some of the billions going to (billionaire) builders and throw it into a fund financing flippers. Let them borrow against their projects at rates similar to those given moisters with 5% down. Encourage the banks to lend to home restorers. Proudly.

Fourth, level the housing playing field by phasing out the principal residence capital gains exemption. So long as this is the only asset class in Canada that yields tax-free gains, it will attract too much investment and speculative capital, crowding out far more productive and jobs-generating economic activity.

Establish a V-day after which gains are taxed consistent with stocks, ETFs, gold bullion, apartment buildings and mutual funds. It will be messy, ugly and unpopular. But surely Canada’s Conservatives – if they sit on a 200-seat majority – will have the stones ot do the right thing for future generations. There is no other way of bringing house prices back to earth but to halt their financialization.

Meanwhile, let’s hug the dudes who can tape drywall, crawl into a sewer pipe trench or laser-level a floor. They exist. They’re ready to deliver houses. They can add supply fast. They create jobs, wealth, tax revenue and better spaces.

Government is not the answer.

Have we learned nothing?

About the picture: “Garth, Meet Rox!e — our 2 year old mini-westie-ausie-doodle,” writes Tim, in Calgary. “She thinks it’s time that I BRUSH up my investments, CLEAN out some of those DOGS dogs and do some tax (F}LOSS selling.  Thank you so much for all your excellent posts that continue to promote constructive, (mostly) respectful and always entertaining discussions. Happy holidays to you and yours, the TI team and all the blog dogs!”

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Source: https://www.greaterfool.ca/2024/12/18/hug-a-flipper/