Finance Minister Carole James modifies housing speculation tax, but impact on revenues remains unclear
The B.C. NDP government will not be applying its "speculation" tax to the Gulf Islands and the Parksville-Qualicum area.
Finance Minister Carole James said instead that it will only apply to Metro Vancouver, Greater Victoria, Kelowna and West Kelowna, Nanaimo to Lantzville, Abbotsford, Chillwack, and Mission.
Analysts have previously called the speculation tax an "occupancy tax" or a "vacancy tax" because it's applied against people who don't live in or rent out residential properties that they own.
Today, James said that British Columbians with vacant second homes are eligible for nonrefundable tax credits that can be applied against speculation taxes up to $2,000.
Before these changes were announced, the B.C. NDP government forecast that the speculation tax was going to bring in $487 million over three years.
Today's announcement did not indicate what impact these changes would have on that amount.
This year, the tax will be 0.5 percent of assessed value. This means that B.C. residents won't pay the levy on second homes worth $400,000 or less.
From 2019 forward, British Columbians will continue paying the 0.5 percent rate, but it will go up to one percent for permanent residents and Canadian citizens who don't live in B.C.
Those deemed to be "foreign investors and satellite families" will pay two percent per year, starting next year.
It will be applied to the assessed value of homes that are not rented out for at least six months of the calendar year in increments of at least 30 days.
"Our government wants to make sure people who live and work here are able to find and afford a good home in their community," James said in a news release. "For too long, this housing crisis was allowed to escalate, and it has hurt working families, renters, students, seniors and others around the province. With this new tax, we're targeting speculation in the housing market and freeing up vacant housing to be homes for British Columbians."
Exemptions have been introduced for owners or tenants undergoing medical care or living in a hospital, long-term care centre, or supportive-care facility.
Owners or tenants who have to leave a home vacant temporarily for work purposes will also be exempted.
The same is true for homes owned by people who've died and the property is part of an estate.
B.C. Liberal Leader Andrew Wilkinson called today's changes "another example of the B.C. NDP making up half-baked tax policy on the fly".
“In just over a month since their first budget, the NDP are already having to reverse one of their major tax announcements," he said. "Even more concerning is the lack of detail on what the lower revenue projections will be as the government tries to fix this blunder.
“After trying to implement taxes by trial and error, the NDP are now scrambling to come up with a plan," he continued. "The updated version of this tax still doesn’t focus on speculators who are flipping homes and condos. Instead, the NDP introduced arbitrary boundary changes to exempted areas that appear to be politically motivated."
B.C. Green Leader Andrew Weaver, on the other hand, said it's a "positive sign that this government is willing to listen to British Columbians and to make adjustments to policies".
"These changes go a long way to dealing with our initial concerns with the tax—they make it much more targeted and limit the effects on British Columbians with vacation homes," he said. "We look forward to the full details of the legislation to ensure it truly limits unintended consequences.
"We will continue to advocate for bolder policies to address speculation, including a flipping tax, the closing of the bare trust loophole and a New Zealand-style ban on foreign capital,” Weaver added.
The Greens are especially pleased that the Gulf Islands have been exempted. This area is represented in the legislature by B.C. Green party Deputy Leader Adam Olson.