On housing, B.C. budget 'sends a message,' say experts
NDP will also introduce a tax on property speculation, but there's no mention of a promised $400 renters' tax rebate
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The B.C. government is taking a stand against speculation in the housing market with new and expanded tax measures announced in its first budget Tuesday, housing experts say.
“They’re sending a message to the market which is that the shenanigans of recent years are not going to be tolerated,” said Joshua Gordon, an assistant professor at Simon Fraser University who studies the housing market.
In an effort to “stabilize” the province’s staggering housing market, the NDP has increased the foreign buyers tax from 15 to 20 per cent and expanded the geographic region that is subject to the tax.
Moving forward, foreign buyers will pay the tax not only in Metro Vancouver, but in Victoria's Capital Regional District, the Fraser Valley, the Central Okanagan and the Nanaimo Regional District, the government announced Tuesday as part of its 2018 budget, which included a 30-point housing plan.
The government also announced it will introduce a speculation tax on residential properties that targets both foreign and domestic speculators who own property in B.C. but aren’t paying taxes here. A tax rate of 0.5 per cent will apply for the 2018 tax year, rising to 2 per cent in 2019.
While Gordon said the budget includes a number of “excellent policies,” including the NDP’s move to bring in a speculator’s tax, he cautioned that the effectiveness of the tax will depend on how it’s enforced and how broad the exemptions are.
Tom Davidoff, the director of UBC’s Centre for Urban Economics and Real Estate, agreed the exemptions to the tax are critical, but overall, he said “I’m very happy.”
“The province is now taking seriously the idea that you cannot buy property in the expensive parts of British Columbia and pay bargain basement tax rates,” he said of the housing measures.
In her budget speech Tuesday afternoon, Finance Minister Carole James said housing affordability is an issue that affects us all.
“The problem has been ignored for too long and the consequences are being felt throughout B.C. with housing costs skyrocketing,” she said. “People want their government to take action, but a piecemeal, reactive approach won’t work.”
Budget 2018 sets out a “comprehensive housing plan that commits to long-term solutions,” she said.
Alongside new tax initiatives aimed at cooling demand, the budget also includes significant investments aimed at increasing the supply of affordable housing. Over the next 10 years the government will invest $6.6 billion to build 114,000 affordable homes, which was an NDP campaign promise.
For renters - who make up some 18 per cent of the Metro Vancouver housing market and faced a vacancy rate of 0.9 per cent as of October - the government plans to invest $378 million in the next three years and $1.8 billion over the next 10 years in rental housing for middle income people. The goal is to build more than 14,000 rental units over the next decade.
Those in the community housing sector are “absolutely thrilled” and “could not be happier,” said Jill Atkey, the managing director of the BC Non-Profit Housing Association
Ahead of the May 2017 election community housing organizations came together to develop an affordable housing plan and now the province has funded their portion of that plan, said Atkey.
Thom Armstrong, the executive director of the Co-op Housing Federation of BC, echoed Atkey’s support for the budget plan.
“I couldn’t be happier,” he said, noting that he’s particularly pleased with the long-term commitments.
“It took us 20 years to dig ourselves into this housing crisis and nobody’s going to work their way out of it in one budget or even in one electoral cycle,” he said.
There is no commitment, however, to another NDP campaign promise to bring in a $400 annual renters' tax rebate. Instead, the government has said it will review the Homeowner Grant to ensure renters and homeowners benefit in similar ways.
Atkey said she’s not surprised that the measure wasn’t included. “It’s not something we were ever fully supportive of,” she said, explaining that it wasn’t targeted to income.
She added that some of the more targeted measures community housing groups called for in their plan were addressed through increases to rental assistance program included in the budget.
By Sept. 2018 average annual rental assistance benefits will increase by $930 for seniors and $800 for families. About 35,000 more families will be eligible for this assistance as the household income cap rises to $40,000 from $35,000.
“There’s always more work that can be done on the income side of things but I know that the provincial government is looking at that,” Atkey said.
The Greater Vancouver Board of Trade said it is generally supportive of the housing measures announced in Tuesday’s budget “as a first step,” noting in a release that low levels of affordable housing can affect the ability to attract and retain workers.
Overall, the business organization said it is “pleased” to see a balanced budget. However, the board expressed some concern that it is partly due to “optimistic growth and revenue forecasts” including a 57.9 per cent jump in natural gas royalty revenue in 2018-2019.
The budget, which is the first for the NDP government, projects a surplus of $219 million this year and forecasts it will eliminate the operating debt in 2018/2019.
By the numbers:
Foreign Buyers Tax to increase from 15 per cent to 20 per cent Speculators can expect to pay a 2 per cent tax on residential properties by 2019 Homeowners will face higher property transfer taxes and higher school taxes on the value of homes over $3 million $734 million over 10 years for housing supports for women and children affected by violence $550 million over 10 years to build 1,750 units of social housing for Indigenous people Funding for 2,500 new supportive housing units for people who are homeless or at risk of homelessness Expanding rental assistance programs for seniors and low-income families to an additional 35,000 households by raising the income eligibility to families earning up to $40,000 By Sept. 2018 average annual rental assistance benefits will increase by $930 for seniors and $800 for families $450 million for a student housing program to help finance new student housing