B.C.’s new property taxes — including the revised speculation tax — will add layers of additional costs for buyers of new homes, says a spokeswoman for Victoria’s development industry.
“It is not helping with housing affordability — in fact, it makes it worse,” said Kathy Hogan, executive director of the Urban Development Institute’s capital region office, on Tuesday.
Greater Victoria has been in the midst of a building boom in recent years as developers put up condominiums and rentals and single-family homes to meet strong demand. But the new taxes are worrying the development sector, with concerns that they could discourage sales and that some projects could be put on hold as a result.
B.C. announced the speculation tax in its February budget. More details and some adjustments were released Monday, but, Hogan said, “It is definitely not enough for the development industry.”
The tax, intended to improve housing affordability in areas where the need is most acute, targets those who own multiple properties and leave them empty.
It would apply to properties in the capital region, with the exception of the Gulf Islands and the Juan de Fuca electoral area. It would also apply to Nanaimo-Lantzville, Metro Vancouver, Kelowna, West Kelowna, Abbotsford, Chilliwack and Mission.
The proposed tax rate is 0.5 per cent of the property value for British Columbians, one per cent for other Canadians, and two per cent for foreign owners.
Second homes valued at less than $400,000 or properties rented out at least six months of the year would be exempt.
The changes are due to be introduced in legislation this fall.
Victoria developer Chris Le Fevre, developer of the Railyards in Vic West, said the tax is “borne of good intent — don’t let homes sit unoccupied that have been bought by out-of-country speculation.”
But its implementation is unfair, he said.
“It penalizes hard-working Canadians who, out of their own toil, have bought second homes. This is grossly unfair, punitive, and contrary to the core ethic of what Canada is all about — a land of opportunity.”
Developers are also concerned about increases to the property transfer tax and the school property tax for properties worth more than $3 million.
Hogan said developers often pay at least $3 million for building sites, meaning they will start paying five per cent, up from three per cent, in property transfer tax — costs her group says are “ultimately passed onto the end buyers.”
A higher school tax is also coming for most properties of $3 million and up.
“It [the combination of taxes] adds layers and layers of taxes onto the end product,” Hogan said.
“Everybody is about affordability right now and that is not helping affordability one bit.”
Hogan said the government should have consulted with the development industry to better understand the impacts of its decisions.
In a letter to Finance Minister Carole James and Housing Minister Selina Robinson, Hogan says the speculation tax could lead to fewer projects moving forward.
“Very often a project’s financing is contingent on achieving success early on the marketing phase. If there is not sufficient support early on, then this increases the likelihood that the project will not come to market at all,” she writes, noting that buyers from Alberta and other parts of Canada often buy in the capital region as part of a long-term retirement plan.
David Chard of Chard Development, which is in the process of developing highrise condos on Broughton Street and Yates, said the development community is “very concerned.”
“I question, has the government modelled the impact of all of these taxes?”
Chard is concerned about the effect on the Victoria economy if the tax drives away out-of-province Canadians who have second homes in the capital.
“Those people come and are involved in the community. They shop, they go to restaurants. They add a lot of vitality to Victoria,” he said.
“It’s very unfair that we are targeting Canadians from other provinces. I think it sends the wrong message.”
Real estate agent Jack Barker said some potential purchasers have backed out because of uncertainty around the speculation tax. “I just think we are going down the wrong road at the moment.”
For out-of-province Canadian purchasers who have properties in the $2-million to $3-million range, that one per cent new tax is a “big number,” he said.
Nanaimo Mayor Bill McKay said it does not make sense to include his community in the speculation tax. “We are trying to determine at this point who the speculators are.”
The city has a shortage of housing and little condominium development, he said, and it needs more affordable housing for the homeless population, single parents and seniors.
Nanaimo is attracting some Lower Mainland residents who cash out and buy homes in the city at lower prices, but, McKay said, there are few foreign investors.
He knows a retired couple who spend half the year in Alberta, where some of their children live, and the rest of the year in their mid-range condo in Nanaimo because their other children live on Vancouver Island.
“These people are clearly not speculators.”
— With files from Katie DeRosa
