Revised B.C. housing tax still a turn off for out-of-province homeowners

British Columbia’s revamped housing tax is still likely to be a deterrent to Canadians living outside the province and could put a drag on local economies dependent on tourism, critics say.

Following a backlash to its proposed speculation tax, B.C.’s NDP government this week unveiled new guidelines that spare most British Columbians from the tax, and reduce the levy to 1 per cent of a property’s value for other Canadians. Foreign investors and “satellite families” who report high worldwide income but pay little income tax in B.C., will still face the original 2 per cent levy.

“They tweaked elements but the taxes are still there,” said Royal LePage president and chief executive Phil Soper. “The framework is the same and a one per cent tax is still material to homeowners living out of province. ”

The original housing plan, intended to curb property speculation in certain overheated markets by taxing empty homes, has been criticized for including tourism rich areas and for unfairly targeting people with vacation properties.

Though the new guidelines cut down the number of regions affected to Metro Vancouver, Kelowna and West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack, Mission and the Capital Region District (excluding the Gulf Islands and Juan de Fuca) – some say the focus should be further narrowed.

In the City of Kelowna, where Albertans account for between 10 and 15 per cent of homeowners, local leaders were “disappointed” by the changes, said Doug Gilchrist director of community planning and strategic investment.

A record level of property development is currently underway in Kelowna, bringing badly needed supply to the market, and “we’re concerned this might discourage that,” he said.

“This still has the potential to have a very significant impact on people wanting to invest in our region and it could have a serious economic impact.”

Though Kelowna had requested measures to address home “flippers” — who will likely be able turn over properties for a profit before the taxes bite – there was nothing in the new guidelines to address the practice, he said.

“This will impact people who own property long term and contribute to the economy,” he said. “We have year-round residents here but we’re also a tourism-related community. We need to accommodate both.”

Though the policies will likely lower prices by prompting those outside B.C. to sell off properties, the knock-on effects could be detrimental to local economies, Soper said.

“If you put in a policy that discourages Albertans and they stop buying, and then local people get worried about falling prices and they stop buying, you create a domino effect,” he said. “The unintended consequences of broad based taxes like this can be quite negative for an economy, not to mention interprovincial relations.”

A Royal LePage survey of 535 real estate professionals in British Columbia and Alberta published Thursday found that 81.5 per cent believed the original tax had already caused a decrease in interest from buyers outside the province. Of the 135 realtors surveyed in Alberta, 75.6 per cent believed Albertans currently owning property in B.C. would sell their properties.

“My guess is those sentiments are still true,” Soper said.

Joshua Gottlieb, associate professor of economics at the University of British Columbia, said the taxes imposed remain “reasonable,” particularly when compared to current levels.

“This is a province with very low property tax rates,” he said. “The changes would raise those rates to more normal levels. That’s a very logical thing to do.”

Nevertheless, Gottlieb would have preferred if the government had applied a single tax to all homeowners, regardless of whether or not they live in B.C.

“I don’t love doing this based on nationality,” he said. ”I understand the political pressures but it would have been more elegant to have the same number for everybody. The economic impact of someone owning a vacation property or vacant house doesn’t depend on whether the owner is from Ontario or China or B.C.”

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