Policy Forum: Revisiting the Principal Residence Exemption and Public Support for Reducing the Home Ownership Tax Shelter

Abstract

This article briefly reviews multiple problematic cultural and economic incentives generated by the principal residence exemption (PRE) from capital gains taxation. It identifies several challenges that arise in revising the PRE as a strategy to reduce the home ownership tax shelter that it creates, if such changes are presented as a primary mechanism to address the inequality and unaffordability produced by decades of previous housing inflation. The author observes that such harms would now be better addressed by adding progressivity to annual property taxation. Regardless of what policy lever is preferred, policy change is required to reduce the home ownership tax shelter. The majority of the article examines Canadian opinion data from February 2022 for evidence of public support for this policy change. These data reveal more public support than is often implied in Canadian political discourse.

Keywords: Home Ownership, Tax Shelters, Principal Residence, Capital Gains, Property Taxes, Public Opinion