Billions for new homes and tougher tax policies held prime real estate in the BC NDP’s first full budget as the party met “huge” expectations with historic spending on housing and affordability measures.
On Tuesday (February 20), Budget 2018 promised more than $6 billion for nearly 34,000 affordable homes and more than $1.8 billion for rental housing over the next decade. The government increased B.C.’s foreign-buyers tax to 20% and expanded its footprint effective Wednesday (February 21), unveiled a real estate speculation tax slated for the fall and raised the property transfer tax on residential homes assessed at over $3 million to 5%.
“We’re taking some bold measures, there’s no question, whether it’s the speculation tax, or whether it’s putting in place a registry around condo flipping,” said Minister of Finance Carole James. “We think that it’s the right direction to go.”
A 30-point plan for long-term housing affordability unveiled a roster of measures and funding commitments aimed at addressing real estate speculation, stabilizing the market and easing tight residential supply.
In total, British Columbians can expect more than $1.6 billion in operating and capital funding over the next three years to support a variety of housing initiatives.
Breaking down the billions:
Fiscal 2018/2019 will see $243 million put toward that three-year, $1.6-billion housing spend to build and maintain affordable rental housing, increase rental assistance, provide housing for vulnerable populations and introduce a new post-secondary student housing program. The total includes:
· $445 million for more than 19,000 units of affordable housing
· $308 million to maintain and upgrade existing social housing
· $259 million toward a $450 million student housing program to support 5,000 new student beds at post-secondary institutions
· $306 million to support 2,500 supportive housing units for the homeless, and 1,500 units for women and children fleeing abuse
· $155 million towards construction of 1,750 units for Indigenous peoples
· $116 million to expand rental assistance programs for low-income seniors and families
Taxation and speculation
Effective Wednesday, the B.C. government is raising the province’s controversial foreign-buyer tax to 20% from 15% and expanding its scope to cover applicable residential property purchases in the Fraser Valley, Central Okanagan, Nanaimo and Capital Region Districts.
“There may be an expansion later on if other municipalities come forward,“ said James.
Government expects the five-point increase to generate $35 million in fiscal 2018/2019, and $40 million in fiscal 2019/2020.
For the fiscal 2017/2018, the 15% tax in Metro Vancouver is forecasted to have put $203 million in government coffers. A higher tax and wider footprint are estimated to bring in $234 million in the fiscal year ahead, $241 million in fiscal 2019/2020, and $246 million in 2020/2021, depending on property values.
Also starting Wednesday, the property transfer tax on residential properties valued over $3 million will increase to 5% from 3%, which is expected to generate an additional $81 million annually over the next two fiscal years. Most properties in this cohort will also see a provincial school tax increase beginning in 2019.
Starting in the fall, an initial 0.5% speculation tax on the assessed value of residential properties will be applied to speculative purchases in Metro Vancouver, the Fraser Valley, Nanaimo and Capital Regional Districts, Kelowna and West Kelowna. In 2019, the tax will rise to 2%.
In general, government says most primary residences and long-term rental properties will receive an upfront exemption from the tax, which is intended to curb real estate speculation by both domestic and foreign buyers who do not pay income tax in British Columbia. This includes those whose homes remain vacant, as well as “satellite families,” which government describes as households that have high worldwide income, but pay little income tax in B.C.
At a rate of 0.5%, the tax is expected to generate $87 million in fiscal 2018/2019. At 2% in 2019, government expects to rake in $200 million.
As previously announced, provincial sales tax (PST) and the municipal and regional district tax – the MRDT or “hotel tax” – will be applied to home-sharing units, after the B.C. government brokered a deal with home-sharing site Airbnb. The taxes will amount to 8% for PST, and up to 3% for the MRDT.
Under close review
Across the BC NDP’s 30-point plan are a number of data-collection measures aimed at fostering greater transparency. Also in the crosshairs are a couple existing programs facing changes or reviews.
Among them, a review the homeowner grant program, as government looks to ensure both renters and homeowners benefit in a similar way. The NDP will also move to change the property tax treatment of residential property in the Agricultural Land Reserve (ALR) as part of a broader ALR review.
Amid concerns of speculation in urban pre-sale markets, the BC NDP will build a database on condominium pre-sales – an initiative that will require developers to collect and report comprehensive information about pre-sale condo purchases. The data will be used to inform future taxation models.
The province will also begin requiring and storing additional information about beneficial ownership, will introduce legislative amendments to require B.C. corporations to hold accurate and current beneficial owner information, and will start collecting social insurance numbers as part of the homeowner grant application process in 2019.
Along with amendments to enable greater collection of buyer information, government will be empowering tax administrators with the ability to compel access to certain information, and create administrative penalties for non-compliance, all in an effort to crack down on tax avoidance, loopholes and murky home ownership transparency.
The BC NDP will be winding down the BC Home Owner Mortgage and Equity (HOME) Partnership program – the BC Liberal’s year-old first-time homebuyer loan program – due to low demand. No new applications will be accepted after March 31.
Twenty million dollars from the program will be reallocated over three years to fund a new partnership office called HousingHub. The centre, to be administered by BC Housing, will act as a project and stakeholder coordinator on housing issues.
Over three years, five million dollars will be allocated to fund housing need assessments for local governments. An expansion to the MRDT or “hotel tax” will unlock revenues for housing affordability initiatives.
From housing measures to the housing market, the B.C. government anticipates that after a 4.4% rise in housing starts in 2017, 2018 will see a 26.8% decline in starts. Property tax revenue is expected to top $2.6 billion in fiscal 2018/2019, and hit $3 billion in 2019/2020. Revenue from property transfer tax will continue to climb, rising on average by 10.4% annually.
James noted that additional tax measures highlighted in the budget are not anticipated to disrupt the market.
“We’re treading new ground, we are taking very bold steps,” said James. “We’ll be [keeping] track and making changes as they’re needed, adding measures as they’re needed.”