Comment 29642

By A Smith (anonymous) | Posted March 20, 2009 at 13:18:53

Ryan >> when society changes the balance of incentives and disincentives, people adjust their decisions accordingly

From 1975 to the end of 2008, home prices, adjusted for inflation, went up approximately 1% per year. Assuming that these figures are roughly the same for Canada, this means that living in Hamilton, with tax rates at 1.6%, a property owner faces a real dollar net loss of .6% of the biggest asset in their portfolio every year because of taxes. If you live in Toronto, you actually make money in real dollar terms by owning a property, gaining about .15% every year in increased net worth.

Is it any wonder that the housing stock in Hamilton is less cared for and more run down than in Toronto and other jurisdictions that have lower tax rates? Why would anyone invest in a home, if by doing so, you end up with a higher net loss on the deal? If the city was smart, it would realize that people do indeed adjust their behaviour based on incentives and disincentives and they would cut rates to less than 1%. By doing this, the city would make owning and investing in housing a winning proposition, not only for the homeowner, but also for the city's tax coffers.

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