In prior blog posts we reported on a number of measures implemented by the government of British Columbia to address skyrocketing prices of residential homes and a shortage of affordable homes for B.C. residents.
First, the government imposed an additional 15% transfer tax on residential real estate purchases by foreign nationals in the Greater Vancouver Regional District.
Then, after a study commissioned by the City of Vancouver indicated that over 10,000 homes (mostly condominium units) had been empty for more than a year (while owners were waiting for their investment properties to appreciate in value), the B.C. government enacted legislation that enabled the City of Vancouver to impose an additional tax on vacant residential homes.
We recently reported that the B.C. government had entered into an agreement with Airbnb to collect provincial sales taxes and municipal and regional taxes from its B.C. hosts and remit the taxes collected to the government. As short-term rentals deplete the supply of homes available for long-term renters, this measure does not directly address the shortage of affordable homes. However, it creates more tax fairness and will generate more tax revenues.
In its most recent budget, the B.C. government announced that it is implementing a new tax on speculators. The tax will target foreign and Canadian speculators who own property in B.C., but do not pay taxes there. The government will also create a data base to record assignments of pre-construction condominiums to ensure that condo flippers do not avoid paying taxes on the profits reaped from their investment. Developers will be required to collect and report comprehensive information about these assignments, which will be shared with federal and provincial tax authorities. Critics had pointed out that there was a loophole in the transfer tax on purchases by foreign nationals: that tax did not catch flips of pre-construction condominiums prior to registration, as the tax is only payable upon registration of a transfer of title.
The government also announced that the tax on purchases by foreign nationals will be increased to 20% and will be expanded beyond Vancouver to other areas of the province.
If these measures achieve what the B.C. government is aiming for, they will stabilize housing prices and raise revenues to help fund affordable housing. As the Greater Toronto Area is also experiencing rising prices of residential homes and a resultant shortage of affordable homes to buy or rent, the Province of Ontario will no doubt be monitoring the results of the B.C. measures.