Jack Knox: Fear of collateral damage arises from tax targeting absentee homeowners

Jack Knox mugshot genericThis is whom the province hopes to target with its new residential-property speculation tax: house-flippers and those awash in foreign capital looking for a place to park. Investors who treat real estate like the stock market, driving house prices beyond the reach of young British Columbians.

This is what Robert Bhatia fears it will mean to him: He’ll have to sell his Victoria duplex and abandon a community of which he feels a part.

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This is what Morey Madsen fears: paying another $14,000 a year while dealing with a family’s worth of health issues.

The tax, announced in last week’s provincial budget, is meant to target absentee owners who treat their holdings strictly as investments, often leaving perfectly good houses sitting empty.

Once fully implemented in 2019, the tax will be two per cent on the assessed value of houses in Greater Victoria, the Nanaimo area, Greater Vancouver, the Fraser Valley, Kelowna and West Kelowna.

The details will be worked out over the next few months, but the B.C. government has said it won’t apply to those who use the property as their principal residence or rent it out long-term. Owners who pay income tax in B.C. will get a tax credit to offset the charge.

“This will leave the bulk of the tax levied on vacant and short-term rental properties owned by individuals who do not live in B.C., as well as satellite families,” says a government backgrounder. Satellite families are those with high worldwide income that pay little income tax here.

Still up in the air is how the government will treat out-of-province owners of vacation properties and retirees who live here part of the year — which has them nervous. Those who are house-rich but still on a fixed income might not be able to pay an extra $10,000 a year on their $500,000 condos.

Morey and Marilyn Madsen certainly don’t feel like speculators. They bought a vacation property in Tofino in 2001, sold there and bought in James Bay four years ago. They actually live in Victoria up to seven months a year, but also spend a lot of time in Alberta, where her mother lives with dementia.

They have been advised to declare themselves B.C. residents and pay income tax in B.C. because for them it would be cheaper than doing so in Alberta, but they worry about losing their Alberta health-care coverage. That’s where they get medical treatment, there being no doctors available to care for them in Victoria.

Besides, it rankles to be treated like aliens who are welcomed as tourists but shunned as property owners. “We’re not foreigners,” Madsen says. “We’re Canadian.”

Robert Bhatia and his wife, Dianne, are also worried. They, too, come from Alberta, where Robert was a longtime deputy minister in the provincial government. Neither works or pays taxes in B.C., but they have been property owners here for about 15 years.

They balk at being lumped in with the land flippers. “We are not absentee owners; we are just not there all the time,” Bhatia wrote. “We know our neighbours and they know us.”

“We are not tourists either. We support arts groups such as the Art Gallery of Greater Victoria, Belfry Theatre, Langham Court Theatre and Dance Victoria. I participate regularly in the Victoria Marathon and, of course, the Times Colonist 10K. We support local charities such as the Mustard Seed. We are embedded in many aspects of the community.”

They also contribute to the economy. “Ten minutes thought enabled us to list over 50 local businesses we patronize regularly or have made major purchases from in the past few years.” That includes lots of spending in the winter months when local businesses are happy for the cash flow.

“The proposed tax would end all of this. We would have to sell our duplex. It would end our financial and personal support for the community. Personally, it is devastating to a multi-generational dream. Our family took 40 years to be in a position to have a second home in Victoria. Our children share in this dream and come to Victoria regularly. I never thought it would end with what amounts to government expropriating our property.”

This might not win much sympathy from those who have been shut out of Victoria’s real estate market. If your winter home is Rock Bay Landing and your summer home is the bushes in Beacon Hill Park, you might not have a lot of time for people who are worried about being taxed out from under their second roof.

In fact, as a veteran of government, Bhatia understands the goal of freeing up housing stock. It just seems unfair that it could be at the expense of retirees for whom a part-time home here was the pot of gold at the end of the rainbow.

Call it the law of unintended consequences, the one that kicks in when government fixates on a target like the non-resident speculators who have no interest in seeing their houses used as homes.

Fire a shotgun at the birds of prey, you’re bound to hit a few snowbirds.

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