Tax­ing de­mand could hit sup­ply

Times Colonist - - Comment -

‘Happy 31st an­niver­sary, prop­er­ty­trans­fer tax! We still hate you.” That’s the gen­eral theme of sub­mis­sions from real-es­tate and hous­ing in­ter­ests to the leg­is­la­ture fi­nance com­mit­tee this week.

It wrapped up a round of hear­ings on what should be in next year’s bud­get. Com­mit­tee mem­bers got an­other ear­ful from var­i­ous or­ga­ni­za­tions on the draw­backs, cul­mi­nat­ing in a quadru­ple hit from four key hous­ing in­ter­ests in the province.

Most of them voiced ob­jec­tions to the prop­erty-trans­fer tax, and added fresh new com­plaints about the other NDP hous­ing-tax mea­sures — the spec­u­la­tion tax and the in­creased school tax on high-end prop­er­ties.

With af­ford­abil­ity the dom­i­nant is­sue these days, the an­nual round of of­fi­cial protests at the hear­ings is keyed to how taxes af­fect own­er­ship.

The trans­fer tax, for ex­am­ple, is $15,000 on the bench­mark $846,000 price of a Van­cou­ver town­house, said the Real Es­tate Board of Greater Van­cou­ver.

Buy­ers try­ing to min­i­mize it would have to go to the cheap­est mar­ket in the re­gion (Maple Ridge) and pay more than half a mil­lion. Even there, the tax would cost $9,300.

Abo­li­tion of the tax looks like a long shot, given that eight pre­miers have turned deaf ears to the pleas. So crit­ics are of­fer­ing re­fine­ments as an al­ter­na­tive.

In­crease the first-time buy­ers’ ex­emp­tion thresh­old to $750,000, from $500,000. Change the grad­u­ated scale to give buy­ers a break. In­dex the thresh­old for ex­emp­tions to in­fla­tion.

Sim­i­lar re­quests are be­ing made about the spec­u­la­tion tax. There’s more of a chance of those be­ing heard, since that con­tro­ver­sial mea­sure is very much a work in progress.

The board rec­om­mends an ex­emp­tion for peo­ple who pay Cana­dian in­come tax, no mat­ter how many homes they own.

“If they pay taxes in Canada, they’re Cana­di­ans, they’re al­ready con­tribut­ing.”

A ques­tion from an MLA crys­tal­lized how se­vere the af­ford­abil­ity prob­lem is, be­cause it was keyed to how hope­less the sit­u­a­tion has be­come.

NDP MLA Bob D’Eith, com­mit­tee chair­man, noted the real es­tate board’s data showed that the an­nual in­come need to buy a de­tached home in Van­cou­ver is $325,000 in take-home pay.

“Quite hon­estly, is the prop­erty trans­fer tax re­ally go­ing to make a dif­fer­ence when the in­come is just not there to be able to af­ford the house in the first place?”

It’s a valid ques­tion. Chip­ping a few thou­sand dol­lars off the gov­ern­ment’s take from a real es­tate deal would scarcely make a dif­fer­ence, when the price is still so out of reach for most peo­ple. There was no easy an­swer. There rarely is. The Cana­dian Home Builders’ As­so­ci­a­tion took a run at the tax is­sue, urg­ing an ex­emp­tion for an­nual taxes on new projects.

Devel­op­ers who buy land to build on pay ex­ist­ing and new taxes dur­ing the lengthy pre-build phase. Ex­empt­ing them would cut the per-unit price.

But the same prob­lem crops up. It would be a neg­li­gi­ble amount, when the all-in price is al­ready so high.

The Ur­ban De­vel­op­ment In­sti­tute made the same pitch. The lux­ury prop­erty tax and the higher school tax on prop­er­ties over $3 mil­lion, plus the spec­u­la­tion tax in some cases, can all ap­ply to de­vel­op­ment sites, not just high-end homes.

The in­sti­tute said it could add $25,000 to a condo price and hun­dreds to an­nual rent costs.

The mes­sage, which has been de­liv­ered pub­licly and pri­vately for months, is that the gov­ern­ment has “to en­sure the new tax mea­sures don’t in­ad­ver­tently in­crease the cost of hous­ing.”

The NDP’s gen­eral line of at­tack was to curb the mar­ket through tax­a­tion to drive prices down to im­prove af­ford­abil­ity. The in­sti­tute is warn­ing that ex­actly the op­po­site could hap­pen.

Ear­lier, Casey Edge of the Vic­to­ria Res­i­den­tial Builders As­so­ci­a­tion set the lo­cal tone — an $880,000 av­er­age price for a house in the Greater Vic­to­ria core, with the vast ma­jor­ity of the value in the land.

There were 3,800 homes built in the re­gion last year, twice the av­er­age, “but it’s still not enough due to the de­mo­graph­ics.” He cited the be­lief that the tax mea­sures won’t do much, be­cause the num­bers aren’t sig­nif­i­cant. “The de­mand is de­mo­graph­ics.”

Thir­teen lo­cal gov­ern­ments with dif­fer­ent rules is a recipe for re­strict­ing sup­ply, he said. “Un­der these con­di­tions, how could we not have an af­ford­abil­ity cri­sis?”

LES LEYNE lleyne@times­colonist.com

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