VANCOUVER (NEWS 1130) – A Nobel Prize winning economist has a prescription for our real estate market’s high prices – a capital gains tax on luxury homes.

The idea put forward by economist Joseph Stiglitz isn’t something pulled out of thin air.

Down in the States homeowners get an exemption for the first $500,000 per couple, but if a property is sold for a value increase larger than that, they pay a capital gains tax.

Tom Davidoff with UBC’s Sauder School of Business says it could help cool things down. “When you take some of the tax onus off people working, and instead put it on people who invest in residential property, you really enhance affordability,” says Davidoff.

Davidoff is among a group of local economists behind a separate proposal to set up a Housing Affordability Fund, financed by a 1.5 per cent surcharge imposed on people who leave homes empty or who are otherwise uninvolved in the Canadian economy.

“The 15 per cent property transfer tax, [Vancouver]’s proposed vacancy tax, these are all nibbling at the same underlying issue,” says Davidoff. “We’re struggling with affordability because our tax system rewards investors in owner real estate, and punishes people who make a living selling stuff or [working a job paying wages].”

Stiglitz made his proposal while speaking with BNN, also calling for vacancy penalties – something Vancouver plans to bring in next year.