Using a backdrop of new construction in Victoria

Using a backdrop of new construction in Victoria

BC VIEWS: Real estate tax increases windfall

Finance Minister Mike de Jong found an extra half billion from property transfer tax last year, with much more to come

The lights came back on in the B.C. legislature last week to reveal the government’s sudden decision to impose a 15 per cent tax on foreign property purchases in Metro Vancouver.

This came after months of government refusal to intervene in a heated urban market in ways that might devalue properties for people whose homes represent a large chunk of their life savings.

It remains to be seen whether this large wrench applied to the problem will cool the market, or trigger declining property values as similar efforts have done in other major cities. The extent of the ripple effect on B.C. communities outside Metro Vancouver is also something that will be closely watched.

Premier Christy Clark and Finance Minister Mike de Jong announced the tax with a week’s notice, leaving realtors and developers scrambling to close deals before thousands more in property transfer tax was imposed on foreign buyers.

This dramatic intervention was based on less than five weeks of information on the nationality of buyers. Early results showed foreign buyers represented five per cent of Metro Vancouver real estate sales. Another two weeks of data showed a spike to nearly 10 per cent, and suddenly the big wrench came out.

Housing Minister Rich Coleman acknowledged that the surprise tax left the real estate industry “taken aback and a bit grumpy.” They worried foreign buyers might back out of deals after sellers have bought another home. They also fear that the tax might pop the real estate bubble, causing a rapid reversal of the long sellers’ market that has taken on a life and a psychology of its own.

One thing is certain. The province’s windfall from the property transfer tax can only grow even further as foreign buyers pay up.

The size of this windfall was shown in the government’s audited public accounts for the 2015-16 fiscal year, which de Jong released just days before announcing the new real estate tax.

The property transfer tax has been a cash cow for the province since Bill Vander Zalm introduced it in the 1980s, and by 2015-16 it had reached about $1.5 billion. For comparison purposes, that’s almost twice as much as total provincial revenue from the forest industry.

The current B.C. budget had forecast that property transfer tax revenues would decline this year and next year. The public accounts showed that for 2015-16, the government took in $468 million more than expected, meaning real estate accounted for most of the provincial surplus.

How much more is raked in by the new transfer tax on foreign buyers remains to be seen, but it will be substantial. And Coleman allows that he has been developing “a really cool plan” to use that money to improve the housing situation for lower-income people.

A couple of weeks ago I described the clamour of urban protesters demanding that governments build thousands of units of social housing. Coleman has long rejected the idea of social housing projects that create clusters of poverty, and he assured me last week that isn’t going to change.

B.C. has 20,000 low-income households getting a rent subsidy today, and Coleman suggested that will be increasing. He’ll be announcing new measures in September to stimulate construction of new rental housing.

It remains to be seen how that will work as well. But it gives the B.C. government lots more money to spend in an election year.

This is the latest of a string of Clark’s election-year fixes. I’ll look at some others in a future column.

Tom Fletcher is B.C. legislature reporter and columnist for Black Press. Email: tfletcher@blackpress.ca Twitter: @tomfletcherbc

 

Just Posted

(File photo)
Poverty reduction survey identifies 10 poverty themes

Poverty reduction plan will be finalized in July 2021

Nanaimo-Ladysmith MP Paul Manly says he has no intentions of leaving the Green Party. (House of Commons image)
Island Green MPs have “no intention” of leaving the party after ‘heartbreaking’ departure

Manly, May only remaining Green MPs after Jenica Atwin left for the Liberals over internal disputes

New COVID-19 cases on Vancouver Island by local health area for the week of May 30-June 5. (B.C. Centre for Disease Control image)
COVID-19 cases drop again almost everywhere on Vancouver Island

Nanaimo had four new cases last week, down from 22 the week before

Justine Keefer’s Cedar Elementary School Grade 6/7 class put together a student paper, as part of a school project. Pictured here Andrew Gregory, left, Felix Leduc, Addison Armstrong, Lucia Walker and Anise Dick. (Karl Yu/News Bulletin)
Cedar Elementary School students create their own newspaper

Grade 6/7 class publishes Wolf Pack News as part of language arts and social studies

Canadian Prime Minister Justin Trudeau participates in a plenary session at the G7 Summit in Carbis Bay, England on Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada donating 13M surplus COVID-19 vaccine doses to poor countries

Trudeau says the government will pay for 87 million shots to be distributed to poor countries

Montreal Canadiens goaltender Carey Price (31) is scored on by Vegas Golden Knights defenseman Alec Martinez, not pictured, during the second period in Game 1 of an NHL hockey Stanley Cup semifinal playoff series Monday, June 14, 2021, in Las Vegas. (AP Photo/John Locher)
Habs fall 4-1 to Vegas Golden Knights in Game 1 of NHL semifinal series

Match was Montreal’s first game outside of Canada in 2021

Kelowna-Lake Country MLA Norm Letnick, assistant deputy speaker at the B.C. legislature, presides over committee discussions. The legislature is completing its delayed spring session this week, with most MLAs participating by video conference. (Hansard TV)
B.C.’s daily COVID-19 infections dip below 100 over weekend

Only 68 new cases recorded Monday, four additional deaths

Gabriola Island artist Sheila Norgate is promoting the Digital Innovation Group’s art impact survey. (File photo)
Vancouver Island artists get behind regional arts impact study

Artists urged to use their stature to help put arts and culture super-region on the map

The BC Ferries website went down for a short while Monday morning following a provincial announcement that recreational travel between health authorities can resume Tuesday. (Black Press Media file photo)
BC Ferries’ website crashes in wake of provincial reopening announcement

Website back up now, recreational travel between health regions to resume as of Tuesday

Neighbours fight a small late-night bush fire with garden hoses and shovels in Cinnabar Valley on June 5. They couldn’t get help from local fire services because the fire was located in an area under B.C. Wildfire Services jurisdiction. (Photo courtesy Muriel Wells)
Neighbours on edge of Nanaimo city limits left to put out bush fire themselves

Cinnabar Valley residents tackle fire with hoses and buckets for two and a half hours

Darren Campbell’s truck (pictured) was stolen when he stopped to check on a car in a ditch on Cowichan Bay Road on Monday morning. (Facebook photo)
Vancouver Island Good Samaritan’s truck stolen in nasty trick

‘Try to be a Good Samaritan and my $20,000 truck gets stolen right under my nose’

The Kamloops Indian Residential School is photographed using a drone in Kamloops, B.C., Monday, June, 14, 2021. The remains of 215 children were discovered buried near the former school earlier this month. THE CANADIAN PRESS/Jonathan Hayward
Communities grapple with what to do with former residential and day schools

Some tear them down as a tool to help healing, others repurpose them as tools for moving forward

Creative handmade signs abound at the June 13 Tofino rally for old growth trees. (Nora O’Malley photo)
VIDEO: Tofino stands in solidarity for Fairy Creek Blockades

Over 150 supporters attend rally hosted by Friends of Clayoquot Sound

Most Read