"After hitting that limit, they’d pay tax on their gains at whatever the going rate is."

After which point, people would have less or little incentive to sell if they're going to be hit with a tax for doing so.   You think housing prices are high now, wait until listings go to near zero.   Imagine if you're a millennial today and the principal residence cap gains tax threshold is a million, you'll blow through that easy in the course of your lifetime.

But hey, the liberal government is going to put the screws to anyone as all governments do.  In this case punishing success and rewarding failure.