Owners of multi-million dollar homes are probably not going to endear themselves to the public by pleading financial hardship. Nevertheless, more than 100 Vancouver residents gathered in a park last week to protest a surtax introduced by the provincial NDP government on homes worth more than $3 million. They wielded signs claiming the government “wants to confiscate your hard-earned home savings!” The tax, they said, is “unfair,” “exorbitant” and “predatory.”

The academic who first raised the proposal is not swayed by the blowback. “A lot of these claims just stretch credulity,” says Rhys Kesselman, a professor in the School of Public Policy at Simon Fraser University. But he does think the government should rethink at least one aspect of the controversial levy.

The province’s NDP government recently implemented a series of measures to tackle runaway home prices and a deepening affordability problem. The cost of owning a home in Vancouver now represents an “astounding” 85 per cent of a typical household’s income, according to RBC. That’s the worst affordability level recorded anywhere in Canada, ever. In February’s provincial budget, the government increased the foreign buyer tax and expanded it beyond Metro Vancouver. The province also implemented a tax on unoccupied homes owned by non-residents, though later dialed it back after

The latest contentious measure is a change to the school tax, which helps fund the education system and is based on property values. Homes worth more than $3 million will be taxed 0.2 per cent on the amount that exceeds that threshold. The owner of a $3.5-million property, for example, would pay an additional $1,000. A 0.4 per cent levy will be applied to the amount by which a home’s value exceeds $4-million.

Kesselman floated the idea in a 2016 op-ed column, and saw it as a way to target foreign investors and speculators, and address house price inflation. He also had concerns that high-net-worth individuals, local or otherwise, can employ methods to avoid income taxes. “A family can pay very little property tax on a two, three, four million home and escape most or all of the income tax,” Kesselman says, “whereas they are benefiting from local schools, the health-care system, peace and law enforcement, and all the good things that make Metro Vancouver very attractive to live in.”

The West Point Grey Residents Association (WPGRA) doesn’t see it that way. The area is home to some of the province’s priciest real estate. (A modest two-bedroom home recently for $2.99-million, and it’s advertised as a teardown project.) The association launched a petition and is urging residents to contact their elected officials. “None will argue the importance of a properly funded education system,” reads a message on the association’s Facebook page, “but extorting homeowners who are victims of an out of control housing market.

The message has found support with opposition politicians, and West Vancouver Mayor Michael Smith, who decried the measure as “scandalous.” B.C. Attorney General David Eby was scheduled to host a town hall last week to discuss the tax, and some real estate players encouraged residents to attend the event if they didn’t have tickets. The event was cancelled due to security concerns. Sutton Group West Coast Realty took out a newspaper ad that amped up the outrage, calling the tax “an attack on on Canadians who have planned and worked hard for their homes.”

"THE EQUITY OF YOUR HOME IS IN JEOPARDY!"



just when you think the #reCartel can't stoop any lower, they find a new way.#vanre pic.twitter.com/11rSsLPkt8 — Sweet Maple Booty 甜枫, a div. of RuhRoh Capital LLC (@penultsquire) April 29, 2018

Cut through the hyperbole, and the underlying point is that home equity is not the same thing as income. If someone purchased a home in Vancouver two decades ago for a fraction of its current multi-million dollar value, the owner doesn’t necessarily have the cash to pay more in taxes. The government took this sort of scenario into account, however. Seniors and families with dependent children living at home can defer the tax until the home is sold.

Kesselman’s original proposal included a deferral for all homeowners, and he still thinks that’s the best approach. “I don’t see why it should be limited,” he says. A blanket deferral would still help address affordability and tax avoidance, while not burdening homeowners who, for whatever reason, may struggle to come up with the addition funds. Kesselman is still skeptical about these claims, however. “If they can pay $10,000 in tax on a $4-million home, they can probably cough up another $2,000,” he says.

On Friday, the government ruled out any changes. Even if the government did tweak the measure as Kesselman suggests, it’s unlikely to appease property owners. The WPGRA says the deferral option is akin to “incurring debt.”

So what accounts for such fierce opposition? Taxing one’s home does feel more personal than, say, taxing an investment portfolio. Our homes are central to our lives, after all, and serve as a sanctuary from the outside world. Homeowners have long been resistant to any perceived incursion on their right to enjoy their properties. Think of the outcry any time a developer wants to add density to a neighbourhood of single-family homes. But the reality is Canada has taken a light touch when it comes to taxing homeownership. Unlike in the U.S., there is no capital gains tax on the sale of a principal residence, nor is there an estate or inheritance tax. Kesselman says real estate may be the most favourably treated form of wealth in Canada. The returns for long-time Vancouver homeowners—and their children, should the wealth be transferred—are better than that of most investment portfolios, even with the surtax.

The WPGRA, meanwhile, is evidently not dropping the fight. Another public meeting is scheduled for later this month, and the association is urging residents to attend. At the very least, the episode illustrates tackling a growing affordability crisis will require strong political will—enough to withstand even the most aggrieved homeowners.

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