Tax ‘pile on’ may not help affordability, critics argue

Call it speculating about speculation taxes. Developers, vacation homeowners, agents and academics are musing and arguing about how housing measures unveiled this week by the B.C. NDP government will unfold.

There has been much cheering for the bold moves, which are meant to improve affordability. They include taxes on speculation and also widened taxes for foreign buyers and luxury properties.

At a breakfast discussion hosted Thursday by the Urban Development Institute, there was, on the sidelines, also some quiet headshaking about future prospects, concern over how effective these taxes will be, and vocal protest by a development industry that accounts for, by some estimates, more than a third of recent economic growth in the province.

“We did expect to see a number of tax measures, but I don’t think we were expecting the full suite of taxes that we saw,” UDI president and CEO Anne McMullin said. “I think somebody said, ‘(it was) a bit of a pile on.’”

“I think (what) concerned us the most is that the government did not signal that they are prepared to address processing times with local governments and so, unless they are prepared to influence or compel local governments to speed up processing times, we see it is going to be very difficult to build the 114,000 (condo and townhome) units that they have promised over the next 10 years.”

Andrey Pavlov, who specializes in real estate finance at Simon Fraser University, told the breakfast crowd he was skeptical about the speculation taxes improving affordability, even though he and some 50 other business professors and economists had, in 2016, called for a tax on sales that involve buyers who don’t pay income tax.

He said affordability is based on “income to (real estate) price ratio,” and there is change if incomes

The NDP budget … increases taxes or costs on just about everyone.

are raised or prices are reduced.

“The point of the original proposal was to shift some of the tax burden from the local population to people who are benefiting from our society, but not contributing to it financially. This seems like a very reasonable approach,” he said.

“Instead, the NDP budget, together with the mini-budget last year, increases taxes or costs on just about everyone, including the locals. So even if real estate prices fall, as they likely will, this does not improve affordability since everyone is poorer.”

Jock Finlayson of the Business Council of B.C., which estimates that over 35 per cent of economic growth in the province in the last few years is attributed to home building and renovation activities, was asked about the future of foreign investment.

“This budget signifies that policy-makers have decided we don’t need foreign investment in residential real estate. It couldn’t be clearer and I think it will be effective in discouraging that, and we certainly have domestic demand for housing. And I think it’s a signal, and one that I support, that policy has to be focused on the needs of the working, productive population here, not global capital markets, so that’s fine,” he said.

“But we don’t want to discourage foreign investment generally in our economy, nor do we want to discourage people from moving to Canada under our various immigration programs, because that’s important in what makes our society and economy successful.”