At a time of serious North American Free Trade Agreement negotiations and the attempt to reach a fair deal for Canadians, Americans and Mexicans, it is interesting that the B.C. budget represents the most anti-foreigner budget ever to be proposed in Canada.
How would Canadians react if the Trump administration imposed foreign buyer taxes and occupancy restrictions on purchases of homes in Semiahmoo, Palm Springs and Scottsdale like those being imposed by the B.C. government on this side of the border?
Much has been made of the fact that many foreigners don’t pay income tax in B.C., and yet the 15% (soon to be 20%) tax on real estate purchases represents $225,000 on a $1.5 million purchase price (or $300,000 on a $1.5 million purchase price in the future). How many years of taxes does this represent for the average employee in B.C.? This tax has had limited effect on price increases either in Vancouver or Toronto, so why double down on an ineffective strategy?
How many foreigners have purchased property so that their children could have a place to live while studying at the University of British Columbia or Simon Fraser University? These students are paying a high out-of-country tuition, effectively subsidizing the tuition of local B.C. students.
Will fewer of these students come to B.C. to study as a consequence of the new laws? Will teachers be laid off and tuition for locals be increased as a consequence? What about those highly skilled people buying residences so that they can move to B.C. or immigrate? What would the region look like without them?
There are new mortgage rules for foreign buyers that have been recently put into place along with new federal laws requiring those who apply for new mortgages to qualify at higher than current market rates. There is also a new speculation tax that is anything but and a new school tax on homes, all geared to drive people away. How can the new B.C. budget’s housing programs effectively be judged to be successful if people are dissuaded from investing and building?
Foreigners owning second homes in Vancouver pay annual property taxes, yet use less than half the public services on average than a full-time Canadian resident. They support a wide range of restaurants, higher-end retail including car dealerships as well as services including legal and real estate. Paying cash for medical services, foreigners effectively help to subsidize the B.C. medical system.
A lower competitive corporate tax rate has been implemented in the U.S., effectively changing the reality of the Canadian economy. Have these new B.C. budget restrictions and penalties given even more reason for foreigners, including Americans, to restrict their investments and new corporate formations in B.C.?
Vancouver is not unique in having a housing crisis. One only need look to Vancouver Island and further to the San Francisco Bay area to find cities experiencing similar pressures.
The demand cycle will continue in earnest with more people moving to B.C. Unless the approval process is streamlined in a meaningful way, supply and density significantly increased, apartment construction expanded and tax benefits passed for developers, prices will continue to rise regardless of the foreign penalties and housing proposals found in the new B.C. budget. At the same time, as higher housing prices prevail, the economy will underperform, and foreigners will look elsewhere where they are more welcome.
My own choice is not to leave, but I feel as though I am being pushed out. •
Richard A. Raisler is president of trueHUEnews.com in Vancouver and was previously chairman of the largest circulation business magazine in the central valley of California for 15 years. He holds a master of architecture degree and an engineering degree and has studied urban planning at the Royal Danish Academy in Copenhagen.