Documents from the British Columbia Finance Ministry say the province would lose $1 billion in residential real estate sales and almost 4,000 construction jobs if government moved to reduce foreign investment in the housing market.
The six-page analysis comes as economists, academics and real estate experts propose a tax on owners of vacant properties to generate a potential Housing Affordability Fund of up to $90 million to be shared among local owners.
Their proposal comes as rental-vacancy rates in Vancouver slipped below one per cent last year and the average selling price for a single-family home on the city’s west side is above $2.5 million.
Premier Christy Clark has said housing affordability will be ‘front and centre’ as the government prepares to deliver its budget next month, but she has also shot down speculation and luxury taxes on foreign investors as fixes for rising prices.
Last June, the government rejected calls from Vancouver Mayor Gregor Robertson to levy speculation and luxury taxes on foreign owners and speculators as a way to keep prices from rising. Clark turned down the plan, saying using taxes to drive down prices could hurt current homeowners by reducing their equity.
A six-page Finance Ministry analysis concluded moves to cut foreign investment in B.C.’s housing market would have little impact on house prices because foreign home buyers comprise less than five per cent of the sales market in the Vancouver area.
The analysis also concluded if home prices fell by 10 per cent due to policy measures, Greater Vancouver homeowners would lose about $60 billion in home equity, about $85,000 each.
Province reviewing tax rates
Last fall, Finance Minister Mike de Jong said the government was reviewing current thresholds for property-purchase tax levels and adjusting the $475,000 property-purchase tax exemption for first-time home buyers as potential housing-relief measures.
B.C.’s current property-purchase tax is charged at a rate of one per cent for the first $200,000 of the sale price and two per cent for the remainder of the market value. The property-purchase tax on a property valued at $250,000 is $3,000.
First-time B.C. home buyers are currently exempt from the property-purchase tax on homes valued up to $475,000.
Assistant UBC professor Tom Davidof, one of the group of academics who suggested the Housing Affordability Fund, said the transfer-tax plans do little to help people who can’t afford to buy and will likely push prices upwards.
“What they are proposing is adding fuel to the fire,” he said. “They are adding demand for a fixed stock of housing. That raises the cost of housing.”
Urban Development Institute president Anne McMullin said Vancouver needs to look at zoning and development-approval changes to ensure more duplexes and condominiums are built in urban areas.
Davidoff called on Clark to convene a summit that brings together developers, politicians, academics and real estate officials to address housing affordability problems in B.C.
Opposition New Democrat Leader John Horgan said Davidoff’s plan is fresh thinking the Clark government must consider.