As British Columbians await the final details of the new policies aimed at cooling the property market and taxing speculators into oblivion, it’s clear the BC NDP Government is juggling a political hot potato.
The BC NDP, which has been left to clean up the housing file after years of inaction from previous Government and a reluctance from the Bank of Canada to hike toxically low interest rates, are caught in the middle of a growing social divide that could get ugly.
It’s now believed the 2% speculation tax which targets homeowners not paying income tax in BC would also capture BC income tax payers who own recreational or seasonal properties.
For example, a British Columbian who owns two homes, a principal residence in Vancouver and a seasonal vacation home in Kelowna would receive a non-refundable income tax credit to offset the speculation tax. However, in many cases it appears the income tax credit would not be enough to offset the speculation tax.
For instance, the speculation tax, which is calculated at 2% of the assessed value on a $1 million dollar recreational property would fetch $20,000 in taxes payable. A British Columbian with an income of $100,000 a year would receive roughly $7000 in income tax credits, leaving a shortfall of about $13,000.
To add to that, asset rich homeowners with property values above $3M will be subject to an additional school tax of 0.2% on the residential portion assessed between $3 million and $4 million and 0.4% on anything above $4M. This equates to an extra $2000 on a $3M home. Local data analyst Jens Von Bergmann calculates the tax will hit 21,000 homes in the city of Vancouver, siphoning $115M in annual tax revenue.
Naturally, this has created a feverish tension amongst social classes and political views. However, a recent poll from Insights West shows 81% of British Columbians support the new policies. The development community, not so much.
In a letter penned to BC finance minister Carole James, UDI President Anne McMullin states “The real estate development industry generates almost $23 billion in annual GDP and sustains over 233,000 well-paying and family-supporting jobs across the province. Our industry’s continuing strength is critical to B.C.’s prosperity now, and in the future.”
“Regrettably, these new broad tax measures will also be applied to development sites purchased to build all forms of housing. Virtually all residential development sites are now above $3 million in Metro Vancouver, so the impacts of these tax increases will be significant and will have the unintended consequence of further undermining housing affordability.”
“UDI requests that the Speculation Tax not apply to British Columbian and Canadian taxpayers. We also request the tax not apply to development sites, as requested for the other taxes. UDI suggests delaying the implementation of the tax until next year so the Ministry can conduct thorough modelling analyses of the potential impacts on the communities where it will be applied, and have detailed consultations with local governments, business/tourism groups, the real estate industry and other key stakeholders in those areas before proceeding with the tax.”