Tax real estate speculation to fund housing and transit, says union
Proposal from BCGEU suggests taxing land value rise and flipping profits.
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The union representing B.C.’s civil servants wants the province to increase taxes on real estate and funnel the revenues to public housing and transit.
“If you rent, as many of our members do, rents are escalating so high that any wage increase we can negotiate is immediately eaten up, and then some, by the escalating cost of rent,” said Paul Finch, the treasurer of the B.C. Government and Service Employees’ Union.
The BCGEU consulted with American economist Michael Hudson on the report. Finch co-authored the report with the president and vice president of CUPE local 1767, the local that represents B.C. Assessment Authority employees. Click here to read the entire report.
Their proposal concentrates on the speculative activity that has pushed prices far beyond what local incomes can support in Metro Vancouver and increasingly in other urban markets like Victoria and Kelowna.
The BCGEU suggests taxing land value increases that happen when infrastructure, such as a SkyTrain extension, is planned in an area. Buyers buy property far in advance of the project under the assumption the land will increase in value.
“This is all profit they’re making without doing any improvements, without investing any money, without lifting a finger,” Finch said. “It’s unearned income.
“What gives that value is the creation of the amenity itself, the infrastructure. We should be funding the Broadway (subway extension) in part – or in whole – by taxing the rise in speculative value of the surrounding real estate that it itself is creating.”
Finch contrasts this approach to municipality’s common practice of levying development cost charges — a development fee that developers say increases the cost of the end housing product. The BCGEU’s suggestion is to tax land, not development — and by doing so, encourage developers to build on land, not just hold it.
The BCGEU proposal also suggests taxing “windfall” profits — that is, taxing the capital gain made on short-term property flips. They would also like the province to close a loophole that allows owners to transfer property to a holding company and avoid the property transfer tax. A surcharge on foreign buyers who don’t live or work in B.C. is another suggestion.
Tom Davidoff, an economist at the University of British Columbia, agrees with much of the union’s proposal.
“I agree land value taxes are a good idea: why punish an owner for building a bigger home or apartments?” he wrote to Metro. “Cities should upzone to allow more affordable homes … and when they do so, they should nab some of the benefit. Then there would be more money to help renters and more affordable housing.”
Davidoff argues that B.C.’s low property taxes and relatively high income and sales taxes makes it attractive to invest in real estate, but less attractive to live and work here.
“We don’t want to collapse the market,” Finch said. “We want to smooth it out so that people don’t experience a massive drop in their home equity, but at the same time we build enough affordable housing at different tiers that people can afford to live and work here.”
Finch said the BCGEU has met with B.C.'s finance and housing ministers as the province works on a housing plan that will be unveiled during next February's budget.