B.C. economist says proposed 1 percent tax on Canadian homes owned by foreigners a “fringe measure”

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      A B.C. economist doesn’t see much happening with a federal tax on Canadian homes owned by foreigners.

      Keith Stewart of the Real Estate Board of Greater Vancouver (REBGV) noted that the “vast majority” of homes are owned by people living in Canada.

      Stewart explained that these properties are held either by owner-occupants or people who invest in these homes and rent them out.

      And so any kind of tax on properties other than these can be considered as a “pretty fringe measure”, Stewart told the Straight in a phone interview.

      The federal Liberal government of Prime Minister Justin Trudeau unveiled its plan to tax foreign-owned homes in its budget announcement on April 19.

      The one percent annual tax will be imposed on properties owned by foreigners who do not live in the country.

      The levy will target “vacant or underused” properties starting on January 1, 2022.

      The budget document recalled that the government it its 2020 fall economic statement indicated thay will roll out a “national, tax-based measure targeting the unproductive use of domestic housing that is owned by nonresident, non-Canadians”.

      “This will help to ensure that foreign, non-resident owners, who simply use Canada as a place to passively store their wealth in housing, pay their fair share,” the document stated.

      The national government will hold consultations on the proposed tax.

      In the phone interview, Stewart indicated that the REBGV is interested to know more about the details of the levy.

      The economist noted that there are already similar tax measures in place in B.C.

      The province collects a 20 percent tax on homes purchased by foreigners in Metro Vancouver, Fraser Valley, Capital Regional District, Nanaimo Regional District, and Central Okanagan.

      In addition, B.C. has a vacancy and speculation tax, which also targets foreigners.

      Meanwhile, the City of Vancouver has an empty-home tax, which targets supposedly unoccupied homes owned by foreigners.

      Stewart’s view of the proposed levy is in line with initial reactions to the federal budget.

      On April 19, Josh Nye with RBC Economics wrote that the measure will have a “marginal impact on housing demand and supply”.

      On the same day, RE/MAX Canada released a statement, saying that taxes are not an answer to the country’s housing situation.

      “Defaulting to conventional changes in tax and/or mortgage policies, as has been deployed in the past and has been reintroduced in this budget as a foreign buyers’ tax, are just short-term quick fixes that fail to address the root causes of the problem,” the real-estate company stated.

      RE/MAX Canada argued that increasing the supply of homes represents the proper response to hightened demand and skyrocketing prices.