Boost incentives to inspire strong, lasting recovery of B.C.'s economy

Fill diverse housing needs and refrain from raising taxes,

The business buzzwords of 2021 are sure to be “economic recovery.”

Various layers of government will be bandying them around. The hard-hit small business community that makes up the bulk of our provincial economy is sure to be focused on them. And it's of utmost importance to individual British Columbians as the federal government commits to ever more stimulus and support spending to help weather the COVID-19 storm.

The question is, what exactly will “economic recovery” mean in the months — and likely years — to come? If the provincial government wants to be on the winning side of economic recovery, it will require significant incentivization, similar to the way B.C. built a healthy regional TV and film sector.

In short, the province needs to get serious about bringing in new business while supporting pre-existing sectors.

One of the main elephants in the room for B.C. is the cost of living. Metro Vancouver frequently tops the list of best international regions in which to live, but it also tops the list of most expensive places to live in Canada.

When it comes to attracting new business, this is a significant hurdle. It's challenging to attract top talent when they face expensive rent and property purchase prices.

Anyone who tells you the provincial government can rectify this quickly or easily is wrong. But there are strong steps forward the province can take. Property values in Metro Vancouver are governed by supply and demand. The bottom line is supply is limited while demand is significant.

B.C. has one of strongest provincial economies in the country. Our temperate weather, a growing and diversified economy, and connection to rapidly growing export markets have made B.C. a popular place to settle. Indeed, over the next 20 years, the Lower Mainland is expected to add over a million people, many of whom will be in their prime household-forming years.

On the housing supply side, however, the province has done little to incentivize the array of development necessary to fill diverse housing needs and has failed to address the need to speed up the development process so that the backlog of potential supply can be brought to market in a timely fashion.

Supply is already woefully behind projected demand, and this needs to be treated as a looming crisis. If the provincial government wishes to significantly slow the rising cost of real estate, increasing supply is the most direct way to do so.

The other challenge that will require a careful policy-based lens is the provincial approach around taxation.

Unlike many other sectors, real estate has been experiencing a boom amid COVID-19. The pandemic has altered the needs of B.C. families as homes have suddenly become a workplace, a school, an entertainment centre and a refuge. It's no wonder that many people are choosing to expand their housing options now.

The spending necessary to bridge B.C. households through this difficult time means a significant increase in provincial debt. The provincial government, however, will need to resist the temptation to use the real estate sector as a piggy bank.

While it appears to be low-hanging fruit, aiming to fill provincial coffers by increasing the tax burden on an already overtaxed sector would be short-sighted and potentially self-defeating should new policies materially disrupt activity.

While this could make up revenue shortfalls in the short term, it would be at the cost of long-term competitiveness.

In the past decade, policy-makers have tried to tame the housing market through a litany of polices aimed at slowing demand. Those polices have largely enjoyed only minor or temporary success.

The average buyer is already saddled with a provincial property transfer tax, goods and services tax, school tax, property taxes and, in some cases, the speculation and vacancy tax.

Before we resort to even more taxes, perhaps we should focus on long-term changes that enhance competitiveness and benefit all B.C. families, helping us to emerge from the COVID-19 crisis stronger.