Today (July 25), the B.C. legislature reconvened for a rare summer session and then kicked the morning off with a surprise move against foreign investment in Metro Vancouver real estate.
Beginning on August 2, the provincial government will collect an additional 15 percent tax on residential real-estate sales where the buyer is a foreign national or a foreign-controlled corporation.
In a press release, Finance Minister Mike de Jong introduced the measure and pointed to new data on Metro Vancouver real estate that found that foreign nationals accounted for 5.1 percent of sales in the region during a three-week period analyzed in June.
“The data we started collecting earlier this summer is showing that foreign nationals invested more than $1 billion into B.C. property between June 10 and July 14, more than 86% of it in the Lower Mainland,” he said quoted there. “While investment from outside Canada is only one factor driving price increases, it represents an additional source of pressure on a market struggling to build enough new homes to keep up. This additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs.”
The move was unexpected but no doubt will be popular with residents of the Metro Vancouver region, where the benchmark price of a single-family detached home increased by more than 70 percent over the last three years.
It was announced in conjunction with details about three other measures related to housing supply and affordability.
The first strips the real-estate industry of powers it’s had to regulate itself.
On June 29, Premier Christy Clark presented the findings of a provincial review of industry practices. She announced the Real Estate Council of B.C. (RECBC) would lose authorities it’s had to investigate and punish members engaging in malpractice. Those powers are being turned over to a newly created “dedicated superintendent of real estate”, Clark said.
The second housing issue that MLAs discussed concerned a plan Vancouver mayor Gregor Robertson proposed to increase supply in the city’s rental market.
On June 22, Robertson said he wanted to place a tax on vacant properties. Such a plan required the provincial government to amend the Vancouver Charter. Today, the Liberal government enacted changes to allow Robertson to proceed with that plan.
Details, including how one defines a vacant property, still have to be worked out. There are also questions that need to be answered about enforcement and difficulties associated with creating a new civic bureaucracy that such a scheme will require. But with today’s changes to the Vancouver Charter, the city now does have the authority to levy a new tax on people who don’t live in apartments or houses they’ve purchased in Vancouver.
Last March, the city released a study that found that in 2014, one percent of single-family and duplex homes were sitting empty and 12.5 percent of condos were vacant. That equates to 950 single-family and duplex homes, 125 rowhouses, and 9,750 empty apartments in Vancouver.
Finally, the provincial government said it is creating a “Housing Priority Initiatives Fund” that will be used to invest in housing and rental programs.
That will open with an initial provincial investment of $75 million and then will receive money collected through the 15-percent tax on foreign buyers. The government’s release said further details would be announced “in the near future”.
With a provincial election less than one year away, the Liberal government has been under intense pressure to do something to address housing affordability in Metro Vancouver.
Along with the changes introduced today, the province said it is working on “additional measures to address the complex causes of rising housing prices in Metro Vancouver”. Those are in the areas of housing and rental supply, public transit, consumer protection, and support for first-time buyers, according to the release.