It’s one of those weird pieces of news that makes you look up from your coffee and wonder how it got this bad.

Late in January, a U.S.-based outfit called Demographia released its latest report on world housing prices. The firm ranks 337 cities around the world, based on affordability. The latest ranking awarded the honour of second place, in terms of unaffordability, to Vancouver. Hong Kong was first. What? Vancouver is worse than New York, Paris, London, Tokyo?

Toronto was up there, too, but with an affordability index of a mere 5.9 vs Vancouver’s 9.5. (Anything over 5.1 is considered severely unaffordable, based on average salaries in those cities.)

Many Canadian homeowners could be forgiven for feeling that they have many of the problems of the rich – without most of the benefits. High housing prices, with corresponding high property taxes, are right up there among those problems. Perhaps even more irritating is the Canadian custom of relying heavily on property taxes to fund the gigantic costs of huge modern cities. What we may have forgotten is that such levies are an antiquated tax, first imposed back in the 19th century, when the only members of the population with means were property owners.

That is certainly not the case now. Most residents of any large city do not own property; yet, many of these non-owners count themselves among the community’s top tier when it comes to income. So, while these well-off renters enjoy a vast network of services, from road maintenance and garbage removal to firefighting and emergency services, social assistance, policing, cultural venues – to name only a few -these residents make no direct contribution to city coffers.

But trying to shift the burden off property owners remains stunningly difficult. Former Toronto mayor David Miller suffered massive declines in popularity when he decided to try it by imposing relatively minor new taxes – one on cars, another (one-time) on land transfers.

It wasn’t hard to see why. No one likes new taxes, and property owners who own cars found themselves paying yet more, with little movement toward a truly equitable tax system.

Some cities with expensive real estate levy small income taxes to even the score. New York City, for instance, taxes all residents of at least medium means between 2% and 3% a year. This tax helps to pay for things Toronto can only fantasize about, such as a functional transit system. It also helps to keep property taxes from escalating out of control when prices hit stratospheric levels. How else can middle-class property owners, who’ve laboured to pay off a mortgage, afford to stay in their homes over decades?

Toronto and other Canadian municipalities lack the authority to tax incomes. But it’s the 21st-century thing to do. Otherwise, that millionaire who is renting your house – because you can’t afford to live in it – just isn’t paying his fair share.

© 2013 Investment Executive. All rights reserved.