Last Tuesday, the NDP government of British Columbia unveiled its 2018-19 budget. Finance Minister Carole James said her government’s “comprehensive housing plan” would focus on tackling speculation, curbing demand, boosting housing supply, and improving security for renters.
Some of the targeted tax changes include:
- Imposing a new speculation tax on those distorting BC’s housing market. The tax will target foreign and domestic speculators who don’t pay taxes in the province, including those who leave their units vacant. The tax will apply in Metro Vancouver, the Fraser Valley, Capital and Nanaimo Regional Districts, and the municipalities of Kelowna and West Kelowna.
- Increasing and expanding the Foreign Buyers’ Tax, so that foreign buyers contribute more for the high quality of life they enjoy in BC. The tax will increase to 20 per cent from 15 per cent, effective from February 21. It will continue to apply in Metro Vancouver, and will be expanded to the Fraser Valley, Central Okanagan and Nanaimo, and the Capital Regional Districts.
- Stabilizing the housing market by boosting the Property Transfer Tax (PTT) and the school tax on the wealthiest homeowners who purchase or own homes valued higher than $3m.
- Taking action to reduce tax fraud and close loopholes. “We are strengthening tax administrators’ audit and enforcement powers to help close information gaps and ensure tax compliance,” the BC government said.
The housing plan includes actions to build the homes people need and improve security for renters. Measures include:
- Investing more than $6bn over 10 years in affordable housing, including homes for growing families, homes for senior citizens, student housing, and housing options for women and children fleeing domestic violence.
- Expanding rental assistance so that new payments to low-income working families will increase by an average of $800 per annum. Payments to seniors will increase by an average of $930 per annum, helping over 35,000 households make their rent more affordable.
BCREA Calls For Transitional Rules
Following the budget’s unveiling, the British Columbia Real Estate Association (BCREA) said the BC government should introduce transitional rules for all transactions impacted by the updated PPT and Foreign Buyers’ Tax.
When the Foreign Buyers’ Tax was introduced in 2016, consumers and realtors were frustrated by the number of collapsed deals due to the way the tax was introduced. At that time, the BCREA asked for grandfathering of transactions underway to ensure a smooth transition.
While the government has indicated transitional rules for the expansion of the Foreign Buyers’ Tax to other parts of the province, BCREA believes this should apply to all transactions.
The association is also concerned that the speculation tax will affect British Columbians who currently own secondary property or want to invest in impacted markets by buying a second home or recreational property.
“The Association welcomes measures in Budget 2018 to increase the supply of affordable housing in British Columbia,” BCREA said. “These initiatives are important steps in supporting those who need the most assistance to find and afford housing.
“However, the government missed the opportunity to help homebuyers across the province by increasing the thresholds to the Property Transfer Tax (PTT) or index those thresholds to reflect the changing real estate market.”
Also read: Real estate bodies react to BC budget