VICTORIA — British Columbia is raising its foreign buyers tax and expanding it to areas outside of Vancouver, while bringing in a new tax on speculators, as part of a sweeping plan to improve affordability in the province’s overheated housing market.
The New Democrat government unveiled a 30-point housing plan in its first full budget on Tuesday that also increases the property transfer tax and school tax on homes over $3 million, and invests $6 billion in building 114,000 affordable homes over the next decade.
“Our intent is to bring stability to housing prices with these changes and have revenues to invest in building affordable housing,” said Finance Minister Carole James.
“We recognize these are bold actions. But that’s what B.C.’s housing crisis demands.”
The previous Liberal government introduced a 15 per cent tax on homes purchased by foreigners in the Metro Vancouver area in 2016. Sales of detached homes slowed for several months but prices did not fall.
The minority NDP government will increase the tax to 20 per cent and expand it to the Fraser Valley, central Okanagan, the Nanaimo Regional District and the Victoria-area.
The changes to the foreign buyers tax take effect on Wednesday.
The speculation tax will be introduced this fall. The new annual property tax will target foreign and domestic homeowners who do not pay income tax in B.C, including those who leave homes vacant. So-called satellite families, or households with high foreign incomes that pay little provincial income tax, will also have to pay the tax.
Principal residences and long-term rentals will generally be exempt, meaning the majority of B.C. homeowners will not pay the tax, James said.
“This is a major important step to end speculation in our market,” she said. “This tax will penalize people who have been parking their capital in our housing market simply to speculate, driving up prices and removing rental stock.”
In 2018, the tax will be $5 per $1,000 of a property’s assessed value. In 2019, the tax rate will rise to $20 per $1,000 of assessed value. It will initially apply to Metro Vancouver, the Fraser Valley, the Victoria-area, the Nanaimo Regional District, Kelowna and West Kelowna.
The government says it’s closing real estate loopholes that allow people to skirt tax laws. It’s building a database on pre-sale condo assignments that it will share with tax authorities in an effort to ensure people who sell and resell contract assignments are paying the appropriate taxes.
The plan also addresses supply through what the government says is the largest investment in housing affordability in B.C. history — more than $6 billion over 10 years to deliver 114,000 homes. That includes more than 14,000 rental units for middle-income people, students, and women and children fleeing violence; 1,750 units for Indigenous people and 2,500 homes for the homeless.
The plan includes help for renters, with commitments to increase a grant for elderly renters and a program that helps low-income families.
The government says it’s working with municipalities to develop new tools, such as rental-only zoning, and creating a new office through BC Housing to partner with non-profits and developers to build affordable homes.
Recent statistics from the Real Estate Board of Greater Vancouver show the average price of a detached home was $1.6 million and the average price of an apartment was $665,400. Vacancy rates for renters are at one per cent or lower in most cities across B.C., including Victoria and Kelowna.
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