Court rules taxing foreign buyers of homes not racist
Decision could affect federal housing policies
A B.C. Court of Appeal ruling that declares nothing is racist about taxing foreign buyers of real estate in Canada clears the way for federal politicians to propose bold policies to deal with the crisis of housing unaffordability.
With an election call in the offing, Canada's three largest political parties can feel freer to challenge critics and make stronger promises than they already have to restrict foreign ownership. In effect, that means Canada can join most nations of the world in standing up for national sovereignty.
B.C. Appeal Court Justice Barbara Fisher has confirmed, in a unanimous decision of the three-judge panel, that the province's 20 per cent tax on foreign buyers of residential property rose out of the valid “view that foreign nationals significantly contributed to the escalation of prices of housing” in Metro Vancouver. She stated the tax “was neither a stereotype nor a continuation of racist policies from the past.”
The judges rejected the extensive argument by Chinese national Jing Li, a temporary resident of Canada represented by the late lawyer Joe Arvay, that the tax perpetuates “prejudice, stereotyping, or disadvantages on Chinese people.” While Fisher concluded that, indeed, “a higher proportion of foreign buyers were from China,” she said the tax is constitutional because it does not differentiate based on country of origin.
By claiming a foreign-buyers tax is xenophobic and prejudicial to Chinese people, Li, supported by University of B.C. academics Henry Yu and Nathan Lauster, was in effect arguing for a kind of open-border policy that would require Canada to give foreign nationals the same freedoms in the housing market as citizens and permanent residents.
Fisher acknowledged the housing debate might have contributed to anti-asian sentiments among some people, but she said that does not justify censoring Canadians “who simply sought to have a candid discussion about the problem of foreign demand on the local residential housing market.”
Andy Yan, director of Simon Fraser University's City Program, whose evidence was praised by the trial judge, said the ruling should wash away politicians' fears of being accused of racism if they support restricting foreign investment.
“The first one on the beach is the one who gets shot,” Yan said, referring to the D-day invasion of Europe during the Second World War. “Now the beach is all clear.”
Canada has been one of the slowest jurisdictions in the world to impose limits on foreign ownership of real estate.
“This is not about Canada leading. We're following,” Yan said. “We're maybe just about to catch up on what's happening in other parts of the world in regard to non-nationals buying residential real estate.”
Steve Saretsky, a Vancouver housing analyst, said in his newsletter Monday that the federal parties, after years of silence on the subject, look like they're finally ready to make foreign ownership a leading election issue.
The ruling Liberals are mulling what some consider the weakest proposal: A one per cent tax on non-resident foreign owners. The federal NDP have proposed a national 20 per cent foreign-buyers tax. The Conservatives go the furthest: They recently proposed to stop housing purchases by non-resident foreign nationals.
Such policies, if instituted, would not begin to match the almost absolute barriers to foreign ownership imposed by many countries, including China. The list of countries with the bans include India, Indonesia, Thailand, the Philippines, Singapore and Malaysia. Most other countries, including Mexico and the U.S., also have various restrictions.
Foreign buyers continue each year to invest in B.C. residential properties, often the luxury properties. The most recent data from the Canadian Housing Statistics Program shows that non-residents own five per cent of the housing stock in Metro Vancouver. That figure rises to 7.5 per cent in the city of Vancouver and Richmond. And it jumps again for newly built condos, of which 19 per cent in the city of Vancouver and 24 per cent in Richmond are owned by non-canadians.
Whatever federal politicians end up promising, it's not as if curbing foreign ownership would end the housing affordability crisis in Canada's major cities. As Yan says, housing prices are shaped by not only foreign and domestic demand, but by the supply of dwellings and by changing financing options, including mortgage interest rates.
There are several other policy areas Yan hopes politicians promise to address in the federal election expected this fall.
They include curbing “property speculation” by both foreign and domestic investors, stopping the rapid “flipping” of homes for a quick profit and increasing food security by protecting farmland, which is vulnerable to foreign ownership and to being misused for mansions and non-agricultural purposes.
There could also be national versions of B.C.'S property and speculation tax, which attempts to monitor the more extensive foreign ownership that is not tracked by the Canadian Housing Statistics Program. That is, property owned by proxies for foreign nationals and by “satellite families,” whose breadwinners make more than half their income outside the country.
The Canada Revenue Agency could do much more, Yan said, to take part in the kind of inter-bureaucracy information sharing that is supporting B.C.'S speculation tax, which monitors owners not paying their share of Canadian income taxes. “With big data now, there are few excuses for not looking into these loopholes.”