Province presses ahead with housing speculation tax
Finance Minister Carole James would be on firmer ground with the first-of-itskind speculation tax she introduced Tuesday if more of the mayors directly affected supported it.
She’s imposing a punitive new tax on vacant homes in the five most populous regions of B.C.
If local governments there were overwhelmingly welcoming and supportive, there’d be a lot more confidence that this tax is going to do what it is designed to do.
But they aren’t. Some mayors oppose it adamantly. They’ve been arguing about it for months since James signalled in the February budget that it was coming.
The argument is over as far as the objecting mayors are concerned, and they mostly lost. There are a few refinements to what was initially outlined. And James did retreat on the scope and impact in the early going.
But it’s mostly as advertised — an annual tax of up to two per cent of assessed value aimed mainly at non-British Columbians who own residences that are vacant all or part of the time in the select regions.
It’s not the first time the province has overruled the locals and it won’t be the last. But you’d think on this paramount issue, the NDP government would get more buy-in from municipalities before imposing the first tax of its kind in Canada on properties within their boundaries.
Langford is a prime example of a jurisdiction that should have been listened to when it comes to affordable housing and what to do about it.
It has gone above and beyond in terms of accommodating new housing for years, with 7,500 new units in the past decade. Month in and month out, its building starts dwarf most other local jurisdictions.
In the never-ending squabble between senior and local governments about who should be doing what about the housing crisis, Langford is the shining example of a government that stepped up and is doing everything it can.
But Mayor Stew Young’s vehement objections to the speculation tax were ignored.
He capped a months-long campaign against the tax this week with a letter to Premier John Horgan and James warning that investments are being cancelled, construction is deferred and purchases are being delayed since the first mention of the tax.
Young said economic signs are pointing to a downturn that could be worse than the meltdown in 2007.
A speculation tax risks turning a cooling market into a recession that would start costing jobs, he said.
“Importantly, the proposed speculation tax does nothing to increase the supply of housing or grow the economy. In fact, it actually undermines Langford’s approach.
“If it achieves its intended goal, the tax will devalue people’s most important asset by 20 to 30 per cent. To force such an unprecedented, and frankly unfair, financial cost on homeowners will cause many mortgages to go underwater.”
Opposition B.C. Liberals read his objections into the record along with similar complaints from Kelowna.
But the course is set. Citing polling that shows strong support for the tax, James highlighted the wealthy class she is going after to keep up the momentum. She said it would encourage “out-of-province real estate speculators” and people sitting on “empty second and third homes” to put them on the rental or sales market.
She also stressed the enormity of the affordability crisis as the main driver for the tax.
The housing crisis has spread from Vancouver to all major centres and smaller communities as well, she said.
Prices are completely disconnected from local incomes, and in a “major provincial crisis,” it’s up to the provincial government to take charge.
There are several exemptions, including one for property where construction is planned or underway.
But it’s still going to be viewed as a hostile act by Canadians elsewhere who want to put their money into B.C. and will pay thousands more a year in penalties for doing so.
The goals are admirable — moderate the market and bring in millions for social housing.
But there would be more confidence about reaching them if the mayor who knows more about building housing than most wasn’t insisting this tax is going to devastate the economy.
British Columbia’s proposed speculation and vacancy tax is aimed at cooling an overheated real estate market and convincing owners of vacant homes in some urban areas to either sell or rent their properties, says Finance Minister Carole James.
The legislation introduced Tuesday would impose a tax of either 0.5 per cent, one per cent or two per cent on the assessed value of a vacant property in the 2019 taxation year and onwards.
The highest rate of two per cent would be applied to foreign owners and so-called satellite families, or those who don’t report the majority of their income on Canadian tax returns, James said.
Canadian citizens and permanent residents who don’t live in the province would pay one per cent on their homes assessed value.
B.C. residents who own a secondary home and don’t rent it out would pay a tax of 0.5 per cent.
The goal of the tax is to improve housing affordability for thousands of people in B.C., including seniors forced to live in their vehicles and young professionals who leave the province because they can’t find a place to live, James said as she introduced the legislation.
“We are supporting businesses who can’t find employees because they can’t afford housing,” James said. “We are addressing the crisis for families in B.C. That is our job as government and we are going to get it done.”
The tax was introduced in February’s budget with few details as part of the government’s 30-point plan to create 114,000 affordable housing units over the next decade.
“With today’s legislation we’re acting to bring balance back to our housing market,” James told a news conference.
“Is it going to happen overnight? No,” she said. “Is it easy to do? No. But it’s the right thing to do. It reflects our belief as a government that homes purchased in B.C. should shelter people, not out-of-province money.”
Opposition Liberal Leader Andrew Wilkinson said he expects the tax to stifle property development projects, kill construction jobs and chill investor confidence. Wilkinson said he sides with the communities of West Kelowna, Nanaimo and Langford, which are opposed to the tax and asked the government for exemptions.
“Our goal is to defeat this bill,” he said. “It is a phoney tax. It accomplishes nothing except to grab revenue for the NDP. We don’t believe in that.”
The private sector could build enough housing to suit B.C.’s needs if more land were made available for development and the approval process for housing projects were faster, Wilkinson said.
B.C. Green Party Leader Andrew Weaver said he remains concerned Canadians are not being treated equally and added that he will review the legislation.
James said she consulted widely before introducing the legislation, including meeting with local governments opposed to the tax.
She said she would not let municipalities pick and choose what provincial initiatives they support or reject.
James said more than 99 per cent of people in B.C. will not pay the tax, which includes exemptions for principal residences, rented properties and special circumstances that include renovations and hardship.
She said the tax would apply to vacant properties in Metro Vancouver, Kelowna, West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack, Mission and the Capital Regional District.
B.C.’s islands are not part of the taxable area unless accessible by bridge, and reserve lands, treaty lands and lands of a selfgoverning Indigenous Nation are also not part of the taxable region, James said.