Premier unveils plan to tax foreign real-estate buyers an extra 15 per cent
Rob Shaw | The Province
B.C. Premier Christy Clark has unveiled her government’s proposed new legislation aimed at reining in housing costs.
VICTORIA – Foreign buyers of Metro Vancouver real estate will be taxed an additional 15 per cent, the government announced Monday in new legislation.
The tax would increase the property transfer tax on non-Canadian citizens or non-permanent residents purchasing homes. It would begin Aug. 2 and apply to all residential property in Metro Vancouver, excluding the Tsawwassen First Nation.
The government said the additional tax on a $2 million home in the Lower Mainland would amount to $300,000 on a foreign citizen.
Premier Christy Clark said the goal is to keep the dream of homeownership for the middle class alive, amid criticism that skyrocketing real estate prices have made it unaffordable for most ordinary British Columbians to afford homes.
“There are a lot of things happening in the housing market that are making housing more expensive,” Clark told reporters.
“There is evidence now that suggests that very wealthy foreign buyers have raised the price of overall housing for people in British Columbia. If we are going to put British Columbians first, and that is what we are intending to do, we need to make sure that we do everything we can to try and keep houses affordable and try to make sure those very wealthy foreign buyers find it a little bit harder to buy a house in the Greater Vancouver area.
“Because if we can make it a little bit harder for those wealthy foreign buyers we are going to make it a whole lot easier for those middle class British Columbians we want to put first.”
The Opposition NDP said the move will not address the core problem of foreign speculation in Metro Vancouver’s real estate market because it focuses on people and not the money flowing into the region.
“Much of the investment that’s happening now in the Lower Mainland is being directed by cash from somewhere else by people who are already here,” said NDP leader John Horgan. “What we’ve been advocating for… is using the income tax act to determine if people purchasing homes are participating in the economy.”
Though the bill contains provisions for auditing and penalties, Horgan said he thinks it can be circumvented easily.
“You hire yourself a tax lawyer, you hire yourself an accountant and you can get by that pretty quickly,” he said of the self-declared citizenship form. “I think sophisticated investors, those are laundering money in our real estate market, will be able to get by that very quickly.”
The latest government data shows foreign buyers purchased more than $1 billion worth of B.C. property between June 10 and July 14, and 86 per cent of that was in the Lower Mainland.
Finance Minister Mike de Jong said government has the ability to alter the tax to between 10 and 20 per cent, depending on how the market reacts. The goal, he said, is to “diminish the amount of foreign investment.”
That is an abrupt about-face for de Jong, who has spent months arguing that B.C. should not do anything to discourage foreign investment in B.C.’s economy. He said Monday that since then he’s seen a small amount of data that appears to prove foreign buyers are driving up prices.
The rules also apply to foreign-controlled corporations that are not incorporated in Canada or in which at least one beneficiary is a a foreign entity. But it would not apply to commercial property. So the tax would only be levied on a foreign-controlled company that purchases residential real estate or apartment or condo buildings.
The money would go into a special housing account set up in legislation Monday to fund housing affordability projects, rental supply and housing support programs. Government is putting $75 million into the fund initially.
The bill also gives the City of Vancouver power to implement a tax on vacant homes, which the city has argued could help increase the supply of rental housing by encouraging absentee owners to rent out their properties. Vancouver has said it needs a data-sharing agreement with the provincial government to make the tax work.
The bill also removes self-policing in the real estate industry.
The new housing legislation comes as the B.C. Liberal governmentwrestles with criticism it has been slow to act on the housing affordability crisis. Critics have called for government intervention to cool the market and keep home prices in reach of middle-class British Columbians. The government has resisted, saying it didn’t want to interfere and that the issue was primarily one of rising demand for a limited supply of homes. But as the May 2017 election looms on the horizon, both the Liberals and NDP are fighting for voter approval on their plans.
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