Regional mayors brace for Vancouver housing tax ripple effect

Theglobeandmail.com
July 27, 2016
By Frances Bula

Cities outside the Lower Mainland are bracing for the potential ripple effect of the provincial government’s surprise tax on foreign buyers, which will add 15 per cent to the cost of homes sold to people from outside the country - but only in Metro Vancouver.

“We’re one of those unintended consequences. It will push that foreign ownership into the periphery of the region,” Squamish Mayor Patricia Heintzman said. “And we won’t be able to access any of those funds,” she said, referring to the money generated for the province from the new tax, some of which is supposed to go into new housing programs.

In Chilliwack and Victoria, mayors are slightly less alarmed, saying they’ll wait to see the impacts, but they’re also worried about what will happen if foreign investors decide to start making purchases in their communities to avoid the new tax, which comes into place Aug. 2. They’re also frustrated the province is not committing all of the money it is making from B.C.’s real estate boom - both the surplus generated by the existing property-transfer tax and the new money about to roll in - to affordable housing.

The B.C. government announced the added tax earlier this week, saying new data the province began collecting in June were already showing foreign ownership was a factor in the region’s housing market, which has seen rapid price increases during the past year. The latest stats showed buyers who aren’t citizens or permanent residents accounted for about 10 per cent of purchases - valued at $885-million - between June 10 and July 14.

The surprise announcement, less than a year before a provincial election, prompted a bubbling stew of anxiety, fear and some I-told-you-so jubilation throughout southern coastal B.C., as local-government politicians, realtors, brokers, offshore buyers and regular residents try to figure out all the potential impacts.

People who have focused on foreign buyers as the main cause of the region’s startling increase in home prices during the last couple of years are seeing the province’s move as vindication and the start of measures that will help moderate prices.

But for many others, the new tax is a fragmentation bomb whose pieces are likely to land in unexpected places.

Some people have been scrambling the last two days to understand the exact effects.

Realtors are having to call clients in China, India, Britain and the U.S., among others, to let them know about the new tax.

One young British couple that bought a $300,000 condo in the Coquitlam area with the help of their parents, who are local residents, are now having to come up with $40,000 by their closing date, said mortgage broker Dustan Woodhouse.

Another young professional from India, here on a work visa, bought a million-dollar house with $250,000 down and now has to find $150,000 for the new tax, he said.

Jon Stovell, the chair of the Urban Development Institute, said there are 29,000 pre-sales contracts in the region, with likely 2,800 to 3,500 offshore buyers who will be affected.

“We don’t think it’s fair to drop this on 3,000 people.” The UDI is asking the province to at least exempt people with existing contracts.

In Richmond, Mayor Malcolm Brodie has people studying whether it will impact homes built on agricultural land, which accounts for 40 per cent of Richmond.

It turns out, if the land is being used for farming, the added tax will apply only to the house. If the land isn’t being farmed, the 15-per-cent tax will be applied to the entire value of the property.

But for Mr. Brodie and other mayors, a major concern is what help the province is going to give municipalities struggling with a gamut of housing problems.

“Everything from homelessness to affordable home ownership is at a crisis,” said Victoria Mayor Lisa Helps.

Chilliwack Mayor Sharon Gaetz said her city is trying to grapple with everything from homelessness to people being thrown out of apartments through so-called renovictions to local doctors who said they can’t afford to buy anything.

“I do think all the revenues [the province] gains should be put into homelessness and affordable housing,” she said.

Mayors inside the region are scarcely happier. They’re not sure the tax will impact prices. And, they say, the province will collect millions, with no assurance that local cities will get any money to help with their housing problems.

West Vancouver Mayor Michael Smith called the tax a “crock.”

He wanted the right for municipalities to levy their own non-resident tax.

“We would have used the money to create rental housing for our municipal employees, for our teachers, for our kids,” said Mr. Smith, who said West Van recently spent $16-million on land for a potential affordable-housing project but is still looking for the money to build.