B.C. housing starts were up 16 per cent in 2019, with lack of supply identified as a key element of B.C. urban home prices and rents that are among the highest in Canada. (Vernon Morning Star)

B.C. housing starts were up 16 per cent in 2019, with lack of supply identified as a key element of B.C. urban home prices and rents that are among the highest in Canada. (Vernon Morning Star)

Speculation tax doesn’t slow B.C.’s hot housing market

$88 million raised mostly from foreign owners in 2019

The second year of B.C.’s speculation and vacancy tax raised $88 million in 2019, less than half of what was expected when the tax on empty homes in major urban centres with tight vacancy rates went into full effect.

The B.C. finance ministry reported Monday that the tax continues to be paid mostly by non-resident owners and “satellite families,” and that the latest data from affected regions show more properties being offered for long-term rental in order to avoid paying the tax. But urban rents remain high and B.C.’s housing market roared back with record sales in the second half of 2020 after a lull imposed by the COVID-19 pandemic.

B.C.’s average rental vacancy rate increased by seven per cent in 2019, the ministry reported Jan. 11. By the second half of 2020, the top three most expensive rents in Canada, behind Vancouver and Toronto, were Burnaby, Victoria and Kelowna.

The speculation tax applies to secondary homes vacant for six months of the year or more in the designated cities of Abbotsford, Chilliwack, Mission, Kelowna, West Kelowna, Nanaimo, Lantzville, Metro Vancouver and the Capital Regional District around Victoria. All property owners in the affected regions have to fill out an annual declaration of their property occupany, with the next declaration period expected this month.

A major exemption to the empty homes tax comes from apartment properties where the strata council bans rentals. Former finance minister Carole James extended that exemption to the end of 2021, after which the tax would apply to an estimated 5,400 apartments if they are not occupied at least six months of the year.

RELATED: Metro Vancouver property sales shatter record in December

RELATED: Rising income, property transfer tax curb record B.C. deficit

RELATED: Kelowna the fifth-most expensive rental city in Canada

Applied to assessed value each calendar year, the tax started at 0.5 per cent of value for 2018, and rose to two per cent for 2019 for owners who are not citizens or permanent residents of Canada. Former B.C. Green Party leader Andrew Weaver demanded that only foreign owners should be subject to the two per cent rate, and the minority NDP government complied.

Preparing for an annual meeting with mayors of affected municipalities, Finance Minister Selina Robinson acknowledged that housing is still to expensive for many people in B.C. The speculation and vacancy tax has brought in $130 million since it was brought in by the NDP government in 2018, with revenues used for subsidized housing projects in the five regional districts where it is collected.

Speculation and vacancy tax revenues are a trickle compared to B.C.’s property transfer tax on every sale. The province was able to spend more on COVID-19 support payments without pushing its projected deficit past the $14 billion mark, due in part to property transfer tax revenues that exceeded budget projections by $479 million in the first half of the 2020-21 fiscal year.


@tomfletcherbc
tfletcher@blackpress.ca

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