The BC Government is set to follow through with an increase in the BC speculation/empty homes tax, while also removing some previous exemptions.
In the second year of the SVT:
- The tax rate for foreign owners and satellite families will rise to 2% in 2019, up from 0.5% in 2018.
- Property owners will benefit from a retroactive exemption for Canadian Armed Forces members and spouses while in active service, and a retroactive exemption for people who own properties accessible only by water.
- A longer phase-out will be provided for temporary exemptions:
- The exemption for rental restricted stratas will now end Dec. 31, 2021.
- The exemption for strata accommodation properties will now end Dec. 31, 2021.
- The exemption for vacant land will end Dec. 31, 2019.
A couple pieces to note here. I’m not convinced that increasing the speculation tax will suddenly increase the number of people captured by the tax or cause a spike in new listings. As I wrote a few months ago, the first year results show The SVT (speculation vacancy tax) was paid by 11,783 homeowners across BC. More than half (65%) were foreign owners or satellite families.
While I have been involved in transactions where someone was selling because of the SVT, on the whole we haven’t seen sellers panicking and flooding the market with new listings. In fact, as I wrote in The Saretsky Report for November 2019, new listings remain chronically weak.
Second, I have no idea how the BC Government plans to enforce strata corporations to amend their bylaws and have them remove any existing rental restrictions. Many buyers specifically choose to buy into buildings which restrict rentals as they are generally quieter and perceived to be more neighbour friendly (less turnover). I suspect this will drag on in endless lawsuits if it does indeed get passed through in 2021. Strata rental restrictions accounted for 5432 SVT tax exemptions last year.
Lastly, and perhaps more importantly, the exemption for vacant land will end. This will add to the holding costs for developers and will ultimately need to be reflected in the price they are paying for the land. It’s probably another reason why land sales remain sluggish, falling 48% year-over-year in Q3 2019.
BC’s Finance minister Carole James concluded, “After hearing from local leaders, communities and those impacted by the housing crisis, we took a close look at how we can build on the success of our first year — and with these new improvements, we’ve done just that. I recognize there are a variety of views on the speculation and vacancy tax. There are those who oppose the tax and others who want to implement additional tax. I look forward to continuing discussion as we work together to tackle the housing crisis.”