The provincial government will begin tracking the citizenship of people purchasing homes.
“So much of the [affordability discussion] has focused in part in the absence of reliable data on what exactly is going on. Who is buying, where are they from,” said Finance Minister Mike de Jong.
“We think it’s time to start collecting again.”
Proposed changes to the Property Transfer Tax Act will mean home purchasers will have to identify their citizenship for the first time since 1998. Corporations will also have to disclose the citizenship of their directors, and people transferring homes must also disclose who the settlor and beneficiaries are if they are holding the land as bare trustees.
The government hopes they can change necessary tax forms and start collecting data by this summer. The government says all data will be shared with the Canada Revenue Agency, and hopes some of the information can be shared with the general public.
“What are we trying to do is respond to a concern being expressed and theories being developed on what accounts for admittedly a very, very hot housing market…and the best way we can is to resume collecting information,” said De Jong, who added that he didn’t want to assume what the data would show.
I’m going to resist the temptations to deal with hypotheticals. We’ll see what the data shows. I am certain of this – it will generate a very healthy discussion.
Transfer tax reforms, but likely won’t cool the Vancouver market
In addition, the government announced changes to property transfer taxes, but anyone hoping for significant reforms to address housing affordability in Metro Vancouver will likely come away disappointed.
The government has raised the threshold required for the property transfer tax to $750,000. The exemption is only applicable for new homes, and the purchaser must live in the home as a principle resident for one year.
At the same time, the government will raise the property transfer tax from two to three per cent on the value of a property over $2 million — and it applies to all purchases.
De Jong says the amount of money raised by the government through housing purchases will remain approximately the same, but it shifts the burden to more expensive homes.
“The additional revenue that this revenue generates should, we hope, cover the foregone revenue generated by the property transfer tax rates,” he said.
“We’re obviously also hopeful it will create an incentive and an impetus to develop more, construct more housing. Either detached homes, or in certain parts of the province, townhouse or condominiums.”
However, the government announced no new tax on foreign ownership of homes, no new speculation tax, and no new policies to address shadow-flipping. And while raising the threshold for the property transfer tax will help people purchasing detached homes in most of British Columbia, it won’t directly address the vast majority of homes in Vancouver and the surrounding municipalities.
“I expected this to be a pre-election budget, where the big issue of the day is how to make this province more affordable for younger generations…I thought this was the budget to do it. There was very little, next to nothing,” said Paul Kershaw, UBC policy professor and founder of Generation Squeeze.
“We need to acknowledge that the ongoing escalation in housing prices is not a uniform good. It may be good for those who got in the market some time ago, it is absolutely bad for the generation trying to make their way today.”
But De Jong said even in Metro Vancouver and the Fraser Valley, 76 per cent of housing sales were under $1 million.
“This proposition that it is impossible to buy a home in Vancouver…simply isn’t the case,” said De Jong.
“We are viewed as an economy where people can come and succeed. People are coming here. Of all the problems to jurisdictions to have, that’s a far better one than the opposite.”
De Jong argued that they were responding to market forces, and that it would be irresponsible to change province-wide policies to cool the market in one particular area.
“What influences market behaviour? The equation is the same: demand, supply. We’ve taken some pretty purposeful steps to assist those that have the demand, and incentivize the supply,” he said.
“We govern the entire province of British Columbia. Not just one or two neighbourhoods.”
But Kershaw said the affordable housing for young families was out of reach for virtually all young families.
“It is appropriate for us to have regional variation in our approaches to taxing and housing, but let’s be clear: this is not two neighbourhoods in Vancouver. Metro Van stretches to Delta, out to Langley, to the North Shore. It encompasses half of B.C.’s population, and only 15 per cent of properties cost less than half a million and have three bedrooms. This is a fundamental affordability problem facing an entire generation,” he said.
In their release on the announcement, the government pointed to density as the best way to cool the housing market.
“Any long-term mitigation housing prices and housing affordability…must address adequate supply of affordable new construction, particularly multi-family housing,” they wrote.
“Without an increase in housing supply, there will simply be more buyers competing in the same market, ultimately driving prices even higher.”