Renters are subsidizing homeowners, landlords say

September 09, 2010

Laurie Monsebraaten

{{GA_Article.Images.Alttext$}}Home child-care provider Tabatha Andrews, in the home she rents, worries that her dream of home ownership is lost.

Government tax and spending policies “massively favour” homeowners over renters even though renters have half as much income, says a study being released Thursday.

It is a situation that has contributed to the deterioration of rental housing across Canada and has played a part in the collapse of the housing market in the United States, says real estate economist Frank Clayton, who wrote the report for the Canadian and Ontario landlord federations.

“This vastly uneven playing field has significant public policy implications,” Clayton said in an interview.

The largest government subsidies to homeowners come from the tax exemption on capital gains when they sell their principal residence and from the tax-free value homeowners receive by living in their house rather than renting it out and paying tax on the income, the study found.

Other homeowner subsidies include the Home Renovation Tax Credit, GST rebates for new housing and property tax grants.

Nationally, the federal government provides an average of $1,823 in tax breaks and subsidies for every homeowner household, versus $308 per renter household, said the study, which used government data from 2008 and 2009.

In Ontario, tax breaks and subsidies by federal, provincial and municipal governments amount to about $2,629 per homeowner while private market renters receive just $395.

Meanwhile, the average homeowner household income in Ontario in 2008 was $92,885. For renters it was just $45,558, the study notes.

“Renters have a lot less income, so why are we giving all of these incentives to homeowners?” Clayton asked.

For Toronto home child-care provider Tabatha Andrews, the study compounds the stigma she already feels as a renter.

“It really makes me angry that homeowners get all the breaks,” says the 38-year-old mother who fears she and her husband, Dave, and their two young daughters will always be renters.

Andrews admits the $1,300 monthly rent the family pays for its three-bedroom west-end house is a bargain. But with her business so dependent on the local neighbourhood, moving to the suburbs where they might be able to afford to buy is not an option.

“Our study shows renters are subsidizing homeowners,” said Vince Brescia, president of the Federation of Rental-Housing Providers of Ontario, which commissioned the study with the Canadian Federation of Apartment Associations.

And over the past two years, Queen’s Park and Ottawa have made the discrimination against renters worse, he said. In the 2008 budget, Ontario introduced the $500 million homeowner tax credit for seniors. The following year, Ottawa unveiled the $2 billion home renovation tax credit. Neither initiative was extended to renters, Brescia noted.

“We’re not advocating getting rid of subsidies for homeowners,” he said. “But we need more consideration of programs that are going to even things out for renters.”

University of Toronto professor David Hulchanski has been urging governments to address the inequity between homeowners and renters for more than 20 years.

“Housing policy should be neutral,” said Hulchanski who specializes in housing and community development. “People shouldn’t be penalized for renting or for buying.”

To level the playing field, Ottawa should introduce subsidy programs and tax measures to help build and upgrade private rental housing, he said.

“We need housing subsidies and social housing, but we also need private-sector rental buildings,” he said.

Although he hasn’t read the report, Toronto area building industry spokesman Stephen Dupuis questions its findings.

Toronto’s housing industry pays about $50,000 in development fees for every new home constructed and buyers now have to pay the HST, he said.

“I see a lot of tax being paid by homebuyers so I’d have to see a pretty complex spreadsheet before I would believe that somehow the system is biased towards homeowners,” said Dupuis, president of the Building Industry and Land Development Association.

1 thought on “Renters are subsidizing homeowners, landlords say

  1. Angela

    This article focuses on tax credits provided to homeowners, but we should consider the big picture of what the “homeowner” is contributing to the system.

    Consider the statement “the average homeowner household income in Ontario in 2008 was $92,885. For renters it was just $45,558.” With this amount of taxable income, excluding any tax credits for dependents, a person with $92,885 of taxable income in Ontario in 2008 would have paid $25,656 in income tax while a person with $45,558 of taxable income would have paid $8,458. The “average homeowner” would have contributed three times the gross tax, or $17,198, more than the “average renter”. An extra $1,515 in tax credits is not very significant compared to an extra $17,198 paid in income taxes.

    The Home Renovation Tax Credit was a temporary tax credit for 2009 to provide incentive for homeowners to stimulate the economy by investing in their home. The statement that “the federal government provides an average of $1,823 in tax breaks and subsidies for every homeowner household, versus $308 per renter household” is not representative of ongoing tax incentives. Removing the Home Renovation Tax Credit of up to $1,350 would reduce the number quoted above for tax breaks for homeowners. Also consider that GST/HST and/or RST/PST would have been paid on most of those home renovation expenses, which means 13% tax paid on renovation expenses resulting in a 15% home renovation tax credit. It’s almost a wash.

    It’s always a good idea to consider the big picture before forming an opinion on the details.


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