Liberal leader Andrew Wilkinson says he would scrap B.C.’s speculation tax in favour of a new capital gains tax on condo presales, a proposal that experts say is a mixed bag when it come to improving housing affordability.
Wilkinson said Friday that, if elected, he would cancel the government’s speculation and vacancy tax. The NDP tax, implemented in 2018, adds a surcharge onto homes and condos that people leave vacant more than six months of the year in parts of the province, including Greater Victoria and Metro Vancouver.
“What we need, in this community, in Yaletown, in Vancouver and in the Lower Mainland in general, is a tax on people who flip paper condo contracts before the building is even going up,” Wilkinson said at an event in Vancouver-False Creek.
“This is plaguing this community for 10 years, and it’s something that needs to be addressed. Instead of actually dealing with it, the NDP introduced a phoney speculation tax that doesn’t actually address speculation at all. We need to make it more affordable for couples, young people and families entering the housing market to buy a presale contract and know that it’s not going to be the subject of speculation.”
The Liberals proposed a private members’ bill in 2019 that called for a 50 per cent tax on the profit gained from buying a presale home and then flipping that contract for a higher price before the home is built.
NDP Leader John Horgan criticized Wilkinson for his proposal, saying the speculation tax has encouraged owners to put their properties up for rent, improving vacancy rates in areas like Metro Vancouver.
“I think retaining the speculation tax is an important defence against outside money coming in and affecting our housing market the way it has since 2014 to 2016,” said Tom Davidoff, director of the University of B.C.’s Centre for Urban Economics and Real Estate.
Andy Yan, director of The City Program at Simon Fraser University, said the speculation tax, foreign buyer tax and empty homes taxes are quite popular with the public and would not be easy targets for a politician.
But Yan said there’s merit in also cracking down on presales, which are essentially paper transactions before construction is complete.
“I think there’s merit in that because there’s a form of capital gains,” he said. “Through any number of taxation polices, we say we’d tax your capital gains, except for housing.”
There can sometimes be a market frenzy on condo presales, which start before construction has begun, he said. “This is a way of tapping down that frenzy, which in turn is a means of providing affordable housing,” said Yan. “But it’s still not the total solution.”
Davidoff disagreed, saying people who buy a condo in advance are an important part of the real estate sector because they absorb high risk before a unit is constructed, and essentially help finance the development.
“Let the sharks swim with the sharks in the presale,” said Davidoff. “And then if you flip it great. Now, of course, if you make a gain, pay taxes, which I guess is what he’s saying. But getting rid of presale flippers probably makes housing more expensive in the long run, not less expensive.
“It would be like someone saying, ‘Oh my god, these banks, they come in and they charge interest to the developer, and then when the building is complete they get their money back and interest. We’ve got to get rid of these lenders.’
“I mean if somebody said that you’d be like, what are you talking about? That’s how these buildings get financed. So it’s not a very different story. They are like equity partners in the project.”
“Turning back on the speculation and vacancy tax says to the 99 per cent of British Columbians that are not affected by that, we’re going to take $150 million out of your pocket, just like we used to do,” Horgan said. “I believe the speculation and vacancy tax is successful, because it’s addressing people investing in housing to make profit, not buying housing to live.”
Wilkinson also promised a “complete overhaul of property taxation” if elected.
“What has happened in this city particularly, and around the province, is we run into small businesses everywhere that are being driven out of business by property taxation,” said Wilkinson.
“This is not the goal of property taxation, to make it impossible to run a small business. So it’s time for a review of property taxation, because the NDP have layered on 23 new taxes and people are saying they just can’t afford to run their small business anymore. That was before COVID came along, and now they have the crushing burden of taxation, which doesn’t go away, and they have the problem of much reduced revenue. So this is going to take a complete overview, to make sure that we can have a viable small business here in British Columbia.”
— Rob Shaw