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Comment by tici_88 | Hacker News Reader

Foreigners, especially the billionaire type, can and have been setting up shell corporations through which to purchase Canadian real estate. The proposed measure will do nothing to stop this practice.

The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and everyone is talking about it.

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This is correct. The Beaverton has a good satirical article that gave me a chuckle talking about this.

https://www.thebeaverton.com/2022/04/canada-to-ban-foreign-h...

The Beaverton has been hitting it out of the park recently.

Is that because the beaverton writers are getting better, or because the world is getting more ridiculous?

Cripes. This is crazy good. I read for about 30 mins. This feels like The Onion from 10 years ago! Example headline: <<Gay teen moves to Toronto, must once again live in closet>> Perfect fit with this discussion!

We don't have implementation of the bill yet, just the budget line. Obviously the government knows about this problem, so if they take measures to prevent it, then we'll know they are actually serious.

Note that a corporation is not consequence free. An owner occupied home pays no tax on capital gains. A corporation owned one is double taxed.

> A corporation owned one is double taxed.

Are the corporations buying for capital gain or for rental income?

I think if the corporations/foreigners but to rent, this is OK--the house is on the rental market and doesn't sit empty.

The problem arises if ppl park money in the real estate and the units are empty: - This is often "luxury" housing which prevents a more regular buyer/renter-friendly housing units to be built.

Another problem is that some units are converted to airbnbs, and they start to compete on the hotel/business/vacation short-term rental market instead of being rent out for long term for people who live/work in the area.

I'm based in the EU, and this is what I've seen in some of the cities/neighborhoods here. I know very little about Canada's real estate market.

In Poland another phenomenon (not sure how widespread outside of PL) is that ppl buy large-ish apartments and split them into multiple rooms or studios and rent them out to students or ppl early in their career. This inflates prices (as the capital that would have been invested in the stock market goes to housing), but otherwise the number of units increases, so probably less of an issue in the grand scheme of things.

> A corporation owned one is double taxed.

this statement only matters for the current conversation if taxes raised through this mechanism helped maintain property price levels where the taxes are being raised.

The typical workaround in UK is that instead of selling the house, the corporation that directly or or directly owns it is sold instead, usually on a tax haven.

UK property prices surged a lot in the past year, especially in smaller cities. I wonder if the UK government is going to do something about it

My guess would be yes. They will pour more fuel on to the fire...

the only solution is to take away home owners rights to contest planning permissions and massively overhaul planning.

they tried doing this with wind turbines and it was shelved the next day because nimby’s didn’t want wind turbines.

> The typical workaround in UK is that instead of selling the house, the corporation that directly or or directly owns it is sold instead, usually on a tax haven.

Couldn't that be addressed by regulating based on the beneficiary owners, rather than whatever legal entity is the technical owner, and having onerous penalties (e.g. forfeiture) if the beneficiary owner is misreported or obscured?

The British Columbian government is working on a Beneficial Owners Registry that would attempt to address this issue, though there was a recent article that suggested the registry was struggling to get set up. It's a tough problem.

> government knows about this problem, so if they take measures to prevent it

As a casual watcher of Yes, (Prime) Minister I'm sure they will take measures to get some votes but not solve the problem. The sweet spot is the point where you can gather most vote with a measure that causes as little change to the existing problem as possible.

Could a better thought out measure achieve the same goals? How would you do it?

I feel a strong tax on houses you don't personally live in (because you rent them or because you're a company) could be efficient, but I'd love to hear other people's take on the subject.

The sale of investment properties is already subject to capital gains tax.

Which is an incentive to not sell and instead take out a low interest loan using the properties as collateral. Many cities do have a Homestead exemption which reduces the real estate tax for primary residences.

I mean a strong yearly tax on home ownership with an exemption for primary residences.

Why should investment properties be taxed worse than say, stocks?

If property is expensive, it means there's a demand for it. The price is a good signal that the area needs more properties built. It's only the gov't (local gov't perhaps, or NIMBYs) that are stopping it from happening.

Raising taxes isn't going to fix the problem. It only forces existing investors who are on the margins to get pushed out.

> Why should investment properties be taxed worse than say, stocks

Because they are a fundamental human need, and in limited supply. Good land is fundamentally limited. You can't build more of it.

> they are a fundamental human need

shelter is a fundamental need, not the desire to own an asset. You do not need to purchase, as renting is much cheaper (esp. at current asset prices).

And while you cannot create more land (tho tell the dutch that!), you can build more dense. And in an area of growing population, this might be a good solution, as demonstrated in many other cities. However, people who would prefer a single family home with a backyard must be prepared to pay a premium for this privilege.

And my proposal of more investment will indeed help alleviate the lack of shelter by incentivizing more to be built! Taking away investment money for it will only mean a different group losing out vs the existing group. Policies shouldn't decide winners and losers - policies should be made win-win.

> you can build more dense. And in an area of growing population, this might be a good solution, as demonstrated in many other cities.

All the places I’ve lived with growing populations recently have taught me they will probably do the opposite.

It is not a fundamental human need to live in a super cute townhome in a hot walkable neighborhood near lots of other people you’d like to socialize with. If you want free housing, it’s out there, just not where you want it.

Only 50% of the gain included for taxation. One could include more (say 75%).

They could also bring in additional property transfer taxes for reach home, taxing people more for each additional property they buy. Singapore does this.

I think Switzerland requires some swiss ownership threshold. From the top of my head it's over 50% owned by the end natural/physical persons. Even trough shell corporations.

Otherwise hike the tax on real estate while reducing at the same time taxes on local residents.

> Could a better thought out measure achieve the same goals? How would you do it?

It's a problem that needs to be solved on the supply side. Trying to solve it on the demand side is like trying to damn a river with a sieve.

So increase the rent to offset the tax.

> The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and everyone is talking about it.

Politics, particularly here in the west, is beginning to feel like exclusively this to me.

There is no law yet so no implementation that shell companies can skirt. You are getting ahead of the horse. This is a signal from the Canadian government to foreign investors that Canadian housing could no longer be a safe investment for their money shortly.

https://pm.gc.ca/en/news/news-releases/2022/04/13/helping-yo...

Exactly. Without an airtight national beneficial ownership registry, this "ban" is just theatre and pandering for votes

Most foreign buyers are not billionaires, that said, the foreign buyer loophole seems bad.

This feels like nationalism, in delivery no matter how true it may be.

It's really crazy to me that so many people have apparently come to believe that it is bad for countries to implement measures that protect the interests and well-being of their own citizens above those of foreigners.

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