A housing affordability surcharge is being proposed as a way to redistribute money from investment property owners – including foreigners and other owners of vacant homes – to other residents in the same participating city.
The UBC and SFU business professors behind the idea say it would be a modest step to restrain the upward spiral of house prices in hot real estate markets.
But more importantly, they say, it would spur investors to rent out now-vacant homes rather than merely using B.C. residential real estate as a place to park money.
The proposal for the B.C. Housing Affordability Fund would create a 1.5 per cent tax on the assessed value – a $1 million home would be charged $15,000 per year.
But it would come with a long list of exemptions to exclude most resident owners. Seniors receiving CPP or OAS wouldn’t pay, nor would veterans, the disabled or anyone who has lived in their own home for several years.
For others, the surcharge would be reduced for every dollar paid in annual income taxes by the owners, meaning the average working family in a typical home would likely owe nothing.
Non-resident owners of vacant homes would have their surcharge reduced by the amount of rental revenue they declare to the federal government.
“The targets are people who own real estate and leave it vacant and people who live here but essentially don’t declare much in Canadian income,” UBC’s Tsur Somerville explained.
Those targets would include Canadian investors who own condos in Vancouver but find it easier to leave them empty than rent them, as well as wealthy Chinese families where the wife and kids live here but pay no income tax while the father works in China.
“Our intention was not to make it explicitly about foreigners,” Somerville said.
“It was to make it about people who through their choices make housing more expensive for the people who are trying to live and work and carry on a normal life here.”
Each municipality would decide if it wished to participate and money raised within its borders would be redistributed there. The academics are split on whether it should be rebated equally to all Canadian tax filers within the city or geared more to those in greater need.
They estimate it could raise at least $90 million within Vancouver alone.
Premier Christy Clark praised the proposal but stressed it is problematic.
“It’s a good idea, but the execution is really hard,” Clark said.
“We are looking at it. It’s really complicated, though. If somebody goes away for a year, a university prof goes on a sabbatical at the University of Beijing, should we tax them? A senior citizen finds themselves in hospital for a long period of months, should we tax them?”
Greater Vancouver Home Builders Association CEO Robert de Wit said there’s no hard data to justify such a policy.
“It’s well-intended but it’s a bit of a harebrained idea,” he said, adding it would distort the market and create more problems than it solves.
“This could lead to a flight of capital, which is not a good thing for the country.”
B.C. Real Estate Association chief economist Cameron Muir said even the authors admit the proposal would do little to make homes more affordable for most buyers.
NDP leader John Horgan praised the idea as a way to collect needed data on real estate owners and “generate money for affordable housing by taxing speculators and profiteers while remaining invisible to British Columbians filing income tax, seniors living in long-time family homes and landlords.”
The province has signaled it intends to deliver some sort of reform to address housing affordability in the upcoming budget but without hammering down current real estate prices or the equity people have in their homes.
One possibility is an extra increment of the property transfer tax that charges luxury homes more when they change hands. Assistance for new home buyers or renters are potential uses of the extra revenue.
Somerville noted PEI bans non-residents from owning ocean front property and said it’s high time for B.C. to at least gather more information on who owns real estate here.
– files from Tom Fletcher