B.C. government introduces legislation on speculation tax

The legislation did not contain an opt-out clause requested by municipal governments, many of which are warning the tax will have the reverse effect and actually discourage development of new housing.

B.C.'s speculation tax: What you need to know | Vancouver Sun1:37

VICTORIA — B.C.’s New Democratic government dug in its heels on the contentious real estate speculation tax Tuesday, moving forward to bring it into law despite the protests of local mayors and a development community that warned it could cause more affordable housing problems than it will solve.

Finance Minister Carole James introduced enabling legislation for the tax, eight months after it was first announced in February’s provincial budget. It will levy a surcharge on vacant second homes in much of Metro Vancouver and other areas, in an attempt to push owners to either rent out those homes or sell them to boost the housing supply.

The legislation did not contain an opt-out clause requested by municipal governments, many of which are warning the tax will have the reverse effect and actually discourage development of new housing.

“When you face a major provincial crisis like (affordability), it’s the responsibility of the provincial government to act, not to let municipalities pick and choose whether they want to address affordable housing,” James told reporters.

“Affordable housing is a crisis and it’s our responsibility as government to act on that.”

The Union of B.C. Municipalities, whose members voted in September to demand an opt-out provision, expressed disappointment.

“It seems the premier heard many of our local governments, but went in a little bit of a different direction,” said Chilliwack Mayor Sharon Gaetz, UBCM’s second vice-president.

“I know the issue is not going to go away. I’m really hoping it will be carefully monitored and may be an opportunity to look at it again in the short future.”

James did extend an olive branch to the development community by exempting companies holding multiple properties for new housing development if they can show they are moving forward on a regular permitting, consultation, financing and construction project schedule “without undue delay.”

Urban Development Institute president Anne McMullin said her organization was “pleased” with that exemption.

“In the midst of a housing crisis, we applaud the government’s recognition that taxes on development lands will increase costs on the delivery of all types of new housing,” she said in a statement.

“We encourage government to also act in budget 2019 to apply similar exemptions for the new school tax and other new property taxes that are passed on to eventual homebuyers and renters.”

James said those exemptions are not planned.

The speculation tax will apply to those who own multiple properties in Metro Vancouver, the Capital Regional District (excluding the Gulf Islands and the Strait of Juan de Fuca), Kelowna, West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack and Mission.

The tax will apply at a reduced rate in 2018, based on property owned as of Dec. 31. It expands in 2019 to 0.5 per cent of assessed value for B.C. residents, one per cent for Canadians from outside B.C., and two per cent for non-Canadians.

Owners are exempt if they rent their properties for at least six months a year. And there is also a tax credit for B.C. residents with second homes valued under $400,000.

James pointed to exemptions she said will make the tax fair, including for people facing medical emergencies, people who have to relocate suddenly for a job, seniors who enter care homes, people undergoing a separation, and those with disabilities.

“If people choose to leave their homes vacant where the housing crisis is the deepest, we are asking them to pay their fair share. All that revenue will be returned to British Columbians in the form of affordable housing,” said James.

Academics are split on the effectiveness of the measure. It was partly based upon work done by professors to improve housing measures. However, Andrey Pavlov, who specializes in real estate at Simon Fraser University’s Beedie School of Business, said the tax is poorly named because it does little to curb speculation and is actually more of a vacancy tax.

Pavlov said it might provide short-term relief for rental vacancy and housing prices, but government’s move to limit homeowner rights will actually discourage long-term development.

“It does not address the root cause of the problem,” he said. “I call it symptom relief. That’s fine. But unless it’s very clear this is temporary, it’s just going to backfire in the long run because that measure alone without the corresponding increase in supply is going to reduce new supply even further.”

Pavlov said government should focus more on improving municipal development times.

Government estimates almost two-thirds of those expected to pay the new speculation tax — about 20,000 of the 32,000 homes that qualify — will be British Columbians, not foreigners or residents of other provinces.

James argued Tuesday that figure includes satellite families — defined as B.C. residents who obtain more than 50 per cent of their income from worldwide sources outside of the province. However, she admitted B.C. does not know how many satellite families actually exist in the province.

The tax is expected to generate $201 million in revenue.

Although the legislation was introduced Tuesday, the fate of the tax remains unclear.

The NDP government doesn’t have the votes in the legislature to pass the tax into law without the support of either the Greens or Liberals, both of which have said they want the bill changed to include the opt-out. It remains unclear if the Liberals and Greens can actually work together to pass amendments.

“We’ve said clearly from the start we are opposed to this phoney speculation tax and will be voting against it,” said Opposition Liberal leader Andrew Wilkinson.

Green leader Andrew Weaver said he is still reviewing the bill.

“I still have concerns that Canadians are not being treated equally and that there is an insufficient role for local governments in determining what happens in their communities,” he said.



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