B.C.'s new hefty foreign buyer tax
Good news: With the new 15% tax on foreign buyers, the governing BC Liberals, who have been demonstrably slow off the mark on the housing crisis, seem to now be willing to take significant action!

de_jong_clark.jpgOn Monday the B.C. government made a surprise move by introducing a hefty, 15% tax on foreign purchases of homes in B.C.’s Lower Mainland.

A surprise, because they’ve previously indicated an unwillingness to stem the flood of foreign capital that is directly and indirectly distorting housing markets across B.C.

While there’s more to be done, take some time to celebrate this incremental victory! It’s clear the B.C. government, facing relentless public pressure from people like YOU, decided they had to act.

Details

  • All foreign buyers (including foreign corporations and domestic corporations with foreign ownership) will be charged an additional 15% one-time tax on all residential property purchases in the Lower Mainland starting on Aug 2nd. That is a hefty tax (an additional $150,000 on $1M home).

  • Cabinet will be able to extend the tax to other areas like Victoria and Kelowna (there are already calls for this) and can adjust the tax up to 20% or down to 10%.

  • All proceeds from the tax (potentially hundreds of millions per year) will go into a new dedicated fund focused on increasing supply for both renters and buyers.

  • This kind of tax is already being used in places like Hong Kong, Singapore and London, where there's evidence it has slowed rising prices, especially at the top end of the market.

What does it mean?

  • It’s too early to say how significant the impact on overall housing affordability will be. It’s fair to say foreign capital represents ‘gasoline on the fire’ of housing costs that over a generation have risen far more than incomes in many areas, squeezing younger Canadians particularly hard (though people of ALL ages are affected).

  • If the government is rigorous about closing loopholes, and extending the tax to other B.C. markets, it’ll likely have a cooling effect on the market by reducing foreign demand (the government’s stated goal for the tax).

  • However, average prices in the Lower Mainland (and increasingly elsewhere) have already risen out of reach for many renters and prospective homeowners, so it’s fair to say much more will need to be done to address the affordability crisis.

  • We'll have to wait and see how the proceeds of the tax will be spent, e.g. how many people will be helped and by how much? 

What does it mean, politically?

  • The governing BC Liberals, who have been incredibly reluctant to address this issue, seem to now be willing to take significant actions to address the affordability crisis. That’s good news. 

  • The heftiness of the foreign buyer tax has taken some of the wind out of the sails of the opposition NDP, who for some time have been able to point to an obvious record of inaction on the part of the government. They’ll likely need to roll out more and better policy proposals, soon.

The big picture

  • B.C. is to housing as Saskatchewan was to medical care a generation ago. Just like leadership in Saskatchewan led to a re-think of health care, levelling the playing field and creating a model we're intensely proud of, leadership in B.C. could similarly lead to a re-think of housing policy, level the playing field and making sure we all have access to affordable, suitable homes. 

  • We believe good policy flows from good first principles, which is why we're pushing for our politicians to support the policy principle of Homes, First, which imagines our housing markets being regulated with the stated primary purpose of providing affording, suitable homes for community members to live in (vs. using local housing as speculative investment vehicles, foreign or domestic). 

  • As we all know from our own lives, housing costs are part of a multi-faceted affordability squeeze. In addition to housing market principles and policy, the affordability crisis continues to be exacerbated by child care costs that add the equivalent of a second mortgage or rent payment for many families, by inadequate transportation options, etc. See our Code Red report for a thorough discussion. 

So the key question for B.C. voters next election will be “who’s putting forward the strongest overall plan to ease the squeeze?"

Together, we’ll push for all parties to do more.

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B.C.'s new hefty foreign buyer tax
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