Surreal Estate

I’ve been trying to give this Vice series a chance – the creators of it do seem genuinely interested in research and getting to the bottom of things.

Having just watched the second (and most recent) instalment, it frustrates me how a lot of people interviewed make it so very clear that the real estate pricing issue is “not a race question but a money question,” implying that wealthy property owners are doing damage in the market (which is a mostly plausible argument). But then they all go on to conclude that foreign owners are the problem anyway. Why is the problem not “people with lots of money”? Why do we continue to use “rich foreigners” as a scapegoat when we have so many rich domestic people too?

As someone who’s called out xenophobia in this debate many times, I also specifically take issue with Dr. Ley’s assertion that “people who play the race card want the discussion to end, they do not want a serious discussion.” Besides taking offense of being accused of “playing the race card,” I find it upsetting to have the entire thing diminished in such a way. Personally, I have problems with the foreigner-scapegoating because it’s clear that the problem is investors in general, and especially investors who leave homes unoccupied (there are other problems, too, but that’s undoubtedly one of them). We can use anecdata to create a proxy between foreigners and empty-house-investors, but to me the xenophobia attached to that (labelling all foreigners as “bad investors”, and all domestic people as inherently okay) is obvious.

The fact that I see a problem with using weak stereotype-based proxies like this does NOT mean I think there isn’t a problem, or that I “want the discussion to end.” In fact, I’d like the discussion to go beyond just the shallow surface “too many Chinese people” discussion, and go deeper to the root behaviours and activities that are causing the problem. If there are too many wealthy investors leaving empty homes in the city, let’s do something serious about it – regardless of their nationality.

Ultimately, the thing that bugs me most about the foreigner-blaming is that it lets badly-behaving-investors who are Canadian off the hook. It assumes that all Canadians have the best interests of all other Canadians at heart, and would never play games with our real estate markets. Maybe I’m a pessimist, but I think that’s a very unrealistic assumption.

I also want to bring up a second, and more unnerving point.  There is a remarkable amount of ignorance around Canada’s tax laws and it terrifies me that even realtors are unaware of some of the basic rules. This episode interviewed a realtor who was working with a buyer in Hong Kong.  She was asked “‘What do I have to do as an overseas buyer, what do I have to be careful of or what tax implications are– do I have to be aware of?’ and I [the realtor] said ‘nothing!'”

This is not even close to true! Non-residents who lease out Canadian real estate (it’s unclear if this was the buyer’s plan) are subject to withholding taxes on the rent they receive, and there’s an entire regime built around assessing taxes on rent earned by non-residents.

And when they ultimately sell, any income or capital gain earned as a result of the sale is subject to taxes as well – a lengthy and complex clearance process is required before they are even allowed to receive all the proceeds from their sale, and they are generally required to file a Canadian non-resident tax return to report the disposition and claim back any excess withholding taxes or pay additional taxes if applicable.

The fact that a realtor, whose job it is to advise her client about the risks and implications of the property they’re buying, doesn’t even know this is a really, really, big problem. This is important information for the foreign buyer, but besides that the tax system relies heavily on realtors (and the paralegals they work with, if they work with them) to know what tax laws apply to ensure that proceeds aren’t distributed to the non-resident before the appropriate taxes are withheld.  No wonder so many people think foreigners get away with paying no taxes!

I really appreciate that Vice is bringing forward these perspectives – I just wish it wouldn’t leave unsupportable or in many cases completely inaccurate statements unchallenged.
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