Neil Moody: Housing speculation tax leads to unwanted economic consequences

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      By Neil Moody

      It’s called a speculation tax but one must ask: who are the speculators? That’s because British Columbia’s new housing affordability measure on secondary homes is actually hurting homeowners and aspiring homeowners, along with local economies, rather than just speculators.

      The tax, from our members’ perspective, is hitting both tourism and nontourism areas, both inside and outside the boundaries of its targeted jurisdictions. The Canadian Home Builders' Association, British Columbia has heard countless stories in recent months about cancelled contracts and lost jobs in Kelowna, Golden, Cranbrook, Vernon, and more, as people choose to play it safe amid much uncertainty.

      Stories like one Alberta family that was planning on retiring in British Columbia in the next 10 years and wanted to transition slowly with a second family home in Kelowna, to build roots, before making the eventual move. That contract has been cancelled and the family’s plans are now on hold, as they grapple to understand the implication of the tax. One of the biggest questions is the uncertainty: people who may be able to afford a second home now, fearing that the tax rate or the boundaries of where it is and is not applied, may one day change their affordability calculations.

      We represent small and medium-sized companies who build and renovate homes and supply residential construction material in urban and rural areas of the province. They contribute significantly to their communities and local economies.

      The latest economic data released by our national-level organization in Ottawa, the Canadian Home Builders’ Association, shows that our industry continues to be a significant generator of long-term wealth for Canadians and a major creator of jobs in British Columbia.

      Overall, an estimated 199,249 jobs were created or maintained in the province last year due to new housing starts, renovations, and repairs, up from 190,971 in 2016. On- and off-site jobs in this industry accounted for an estimated $11.9 billion in wages, up from $11.2 billion in 2016. The estimated value of construction work put in place by new home builders and renovators increased to $25 billion in 2017, from $23.3 billion a year earlier.

      That’s no chump change.

      All Canadians should be concerned with this speculation tax, as it is a threat to any out-of-province citizen who aspires to own a home in B.C.

      Many people live in Alberta or Ontario, for instance, and have cabins in British Columbia. They are not speculators but citizens who work hard, contribute to the overall Canadian economy, pay taxes, and want to play in B.C. Or, perhaps they live elsewhere and commute to an office in Vancouver. Why should they be penalized for owning a second home, such as a condo, in downtown Vancouver if this is where they work and live during the week but isn’t their “primary” residence?

      In reality, there’s a big difference between a second property that’s vacant year-round, and one that is being lived in multiple times throughout the weeks and months of the year. As such, the provincial government needs to do more work to clarify whom it really is targeting, as this is a measure that currently fails to make such a distinction.

      Whenever a new home is built elsewhere, or not built at all, much is at stake for many.

      What doesn’t make a difference to rental accommodations—in areas where they are most needed—is a cancelled contract for a home or cabin in rural B.C.

      There are still many questions to be answered surrounding the speculation tax before the legislation is read into law, likely this fall. We are all concerned about housing affordability, but without further tweaks, this is not how to get there.