Speculation tax won’t end the world

The world as we know it is about to end according to the mayors of both Kelowna and West Kelowna, assorted council members, the president of the Okanagan Mainline Real Estate Board and even my own editor, James Miller.

What is the cause of this impending apocalypse? A large meteor headed our way? Donald Trump pulling out of NAFTA? No, it’s the proposed “speculation” tax on houses in high-demand areas that are not either owner-occupied or rented out on a long-term basis.

If a property is subject to the tax, but the owner pays income tax in B.C. (for example, a Vancouver resident with a condo in West Kelowna she uses a few months a year that is otherwise empty), the new tax will be offset by a non-refundable income tax credit.

A major local concern seems to be homes owned by out-of-province people (particularly Albertans) who do not pay income tax in B.C. Will the Albertans suddenly decamp for Saskatchewan leaving local restaurants and wineries without customers?

Another is that the tax will initially apply to properties in Kelowna and West Kelowna, but not in Peachland or Lake Country; thus the tax could divert development.

That fear is symptomatic of the failure of valley communities to act in a coordinated fashion in attracting business and planning economic development.

So we can all send an email to the Minister of Finance and demand the tax be expanded to the entire Central Okanagan Regional District.

Some pundits complain that the speculation tax will do nothing to reduce the cost of housing. Well, it wasn’t designed to reduce the cost, but rather to reduce the upward pressure on housing prices; that it will certainly do. The province wisely left it up to local jurisdictions to deal with increasing the supply of housing and that means all types, not just homes over $500,000.

Why did the provincial government extend the application of a tax clearly targeted primarily to the Vancouver and Victoria regions to Greater Kelowna?

In those cities, the escalation of the cost of housing is having a deleterious impact upon their economies. Young people cannot find reasonably priced accommodation in the central city and are forced to commute long distances even for jobs paying the minimum wage.

Institutions of higher learning are finding that, while the salaries offered are competitive with those offered elsewhere in North America, the cost of housing acts as a barrier to attracting top-flight scholars.

Moreover, major employers are finding it increasingly difficult to attract people to jobs in Brisith Columbia for the same reason.

One of the central objectives of our two city governments has been to attract bright young people earning good wages. It still is. So, we need to think how we can increase the stock of accommodation and especially reasonablypriced starter homes.

Councils need to identify the barriers to building these types of dwellings and what can be done to eliminate them. Worrying that Lake Country and Peachland will boom while the core region slips into a disaster zone really is an absurd waste of time.

In the past five years, the high-tech industry has been growing in the greater Kelowna region mainly because Vancouver is just too expensive. These companies are overwhelmingly staffed by young millennials so they set up shop in the Okanagan because housing is less expensive and the amenities of the region are attractive.

Take away the speculation tax and housing prices could go through the roof here and the growing cluster of high-tech start-ups will quickly move on to someplace else. Do we really want Kelowna to become just like Vancouver — Palm Desert but with rain or, in our case, winter?

Time to get real. We run the risk of choking on our own success. It may take a while for the mayors and the realtors to come round, but I expect more from my editor.

David Bond is a retired bank economist who resides in Kelowna. This column appears Tuesdays. Contact: curmudgeon@harumpf.com.