West Kelowna warns of tax ‘crisis’
Mayor to push Horgan to exclude community from speculation levy
The municipality of West Kelowna has joined a growing backlash against the B.C. government’s real estate speculation tax, demanding it be left out of the measure.
On Tuesday, West Kelowna’s council voted unanimously for Mayor Doug Findlater to meet Premier John Horgan and B.C. Green party Leader Andrew Weaver to push for the Okanagan community to be excluded from the tax.
“We’re very concerned about the overall economic impact,” Findlater said. “We are fundamentally concerned this would push property values below the amount of equity people have in their homes. It’s a potential financial crisis.”
West Kelowna has a large number of part-time residents who would be impacted by the new annual levy, which targets unoccupied homes and secondary homes owned by people not paying income tax in B.C. It would start at 0.5 per cent in 2018 and increase to two per cent in 2019.
Findlater fears that many facing thousands of dollars in new taxes could be forced to sell their homes, causing a glut in the market.
“The irony of this is, if they go through with it, the only people who will be able to afford really expensive places are the really wealthy, who would buy them up at a fire sale price,” he said. “People who picked up a modest place on the lake 20 years ago and kept it in the family are not going to be able to afford to keep them.”
West Kelowna, which incorporated 10 years ago, has a population of 35,000. It’s been trying to urbanize and development has been a boon to the growing community, the mayor said.
The shock waves from the tax, even before its implementation, can already be felt, Findlater said. Banks are shying away from lending to developers, he said, and people applying for residential mortgages might also be affected.
“We do want a decision on this very soon because of the damage this is already doing,” he said. “There is clearly a crisis in confidence about the future over what the province may do.”
The municipality received 239 emails from part-time residents, recreational property owners and developers along with anecdotes from owners who estimate tax increases of $20,000 or $30,000. The municipality believes the speculation tax in West Kelowna will add about $10 million to Victoria’s coffers.
If the province doesn’t bow to the request, Findlater wants the province to prepare a report estimating the economic impact of the tax measure, which West Kelowna expects will have unintended consequences for some non-resident property owners.
The speculation tax, announced in last month’s budget, applies to the Lower Mainland, Victoria, the Nanaimo region, Kelowna and West Kelowna.
Other municipal leaders, including in Kelowna and Parksville, have publicly expressed concern over the impact of the tax on their local economies.
The speculation tax is meant to curb speculation by out-of-province flippers in the real estate market, but also appears to capture B.C. residents or Canadians who own second homes or vacation homes.
In recent days, both Horgan and Finance Minister Carole James made statements hinting at possible exemptions.
But during question period Tuesday, James provided no clarity, saying the tax is a work in progress and that more details will come in the spring with legislation expected in the fall.
“The details will be out on the speculation tax,” she told the legislature.
With such a bold new measure, it is particularly important to provide these principles well in advance of legislation.
Responding to West Kelowna council’s decision, James said the NDP government is taking “bold action” to address an affordability crisis that includes the Kelowna metro area, where the vacancy rate is 0.2 per cent.
“With such a bold new measure, it is particularly important to provide these principles well in advance of legislation and, as indicated at the launch of budget 2018, we are taking the appropriate time to ensure that the tax is as effective and targeted as possible,” James said in a statement.
During a scrum earlier in the afternoon, Horgan said any possible tweaks to the speculation tax have been factored into the budget.
The budget’s revenue forecasts “are conservative already, by design, and we have very generous (contingency funds and forecast allowances) that will make up for any shortfall as we move the tax to its final form this fall,” he said.