The NDP’s recently introduced raft of new housing taxes is shaping up to be a political and economic train wreck that will only make housing even less affordable for British Columbians.
Let’s start with the new “speculation tax.” Most British Columbians can support the concept of a new two per cent annual tax being levied on foreign owners of residential homes, who pay no Canadian income taxes. However, the NDP tax has morphed beyond this relatively supportable proposal developed by academics and economists in 2016, to now capture British Columbian and Canadian taxpayers.
Out-of-province Canadian property owners, who already contribute through local and federal taxes, potentially face additional annual taxes of tens of thousands of dollars.
Of equal concern, many Canadians have purchased residences in B.C. and visit for part of the year, until they’re able to retire full time to our beautiful province. Why on Earth is the government hammering non-speculating taxpaying Canadians, who are often an important part of our tourism and seasonal economies?
In response to the growing outcry from British Columbians and Canadians, the finance minister just announced a myriad of changes to the speculation tax that will amend the tax rates and the regions affected by the tax, and will establish new special definitions and exemptions. Fully implemented, it means a two per cent tax for foreign investors, one per cent for Canadian citizens living outside B.C. and 0.5 per cent for British Columbians who are Canadian citizens or permanent residents.
The areas affected have been narrowed slightly to exclude the Gulf Islands, Juan de Fuca Electoral Area and parts of the mid-Island and upper Fraser Valley.
Space doesn’t permit me to describe the NDP government’s definitions of long-term rentals, nor their myriad of special-case exemptions. Suffice to say, the associated regulations and paperwork are going to be prodigious.
The NDP want to pretend the speculation-tax changes will have little or no impact on British Columbians, because we will be in line for a $2,000 tax credit, which effectively exempts the first $400,000 of assessed value. I don’t buy it. Once in place, it’ll be too tempting for a big-spending government to expand the areas covered, reduce credits provided and lower exemption levels.
It is wrong to penalize taxpaying Canadians, whether from B.C. or not, by falsely suggesting they are all speculators. Furthermore, the manner in which the tax was announced, and the uncertainty it created while the government scrambled to provide fixes after the fact, demonstrate how poorly thought through these changes were.
Regrettably, it’s not just the speculation tax that hits British Columbians. A significant new school property tax on residential properties worth more than $3 million will now apply. This will be in addition to the existing school tax and, importantly, is not specifically allocated to the education system, but rather general revenues.
It is simply a wealth tax by another name. Since it will also apply to virtually all residential-development sites, look forward to potentially hundreds of thousands of dollars in new annual costs for a typical development site.
If the NDP truly want to ensure only speculators are targeted, the tax should be amended to exempt those owners who can provide evidence they have municipal applications underway to build new housing on the sites.
What’s more, the additional luxury-property transfer tax will increase from three per cent to five per cent on homes valued above $3 million. While the “tax the rich” crowd will take some joy in sticking it to those fortunate enough to live in expensive homes, I’ll remind them that when the property-transfer tax was introduced about 30 years ago, 95 per cent of homes were valued below the $200,000 exemption threshold. Now, virtually none are.
Finally, the speculation tax as currently proposed, when layered onto the NDP’s new and increased taxes, will make housing affordability even more of a problem. By applying these taxes to development sites purchased to provide new housing (including rental units), the government has imposed massive new costs, which will inevitably get passed along to the homebuyer or tenant.
These tax changes reek of tax policy being made on the fly. The NDP would be better off refocusing on the original intent of having non-Canadian taxpayers paying their share for the privilege of owning residential real estate in B.C. Hammering Canadians, and particularly British Columbians, makes no sense at all, especially when it exacerbates the housing-affordability issues British Columbians already face.
Kevin Falcon is the former deputy premier and minister of finance for B.C. He is currently executive vice-president of Anthem Capital Corp., the parent of Anthem Properties Group, a real estate investment and development organization.