Photo: Derek Blackadder/Flickr
BC’s new speculation tax is a step in the right direction to improve housing affordability and boost the economy, according to one UBC economist.
Last month, the BC government announced a new speculation tax within its 30-point housing plan which will not only help curb housing demand but bring in extra revenue to the province, says UBC professor Tom Davidoff.
“Overall, it’s a real plus for the economy. You’re raising revenue from something, which is land value around places like Vancouver, that is not going to run away from the tax,” Davidoff tells BuzzBuzzNews.
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“And you’re encouraging more affordability in places where people are really hurting in terms of trying to find a place,” he adds.
Beginning this fall, the speculation tax will be 0.5 per cent of taxable assessed value for the 2018 tax year and two per cent in the years to follow. The levy will apply in Metro Vancouver, Fraser Valley, Capital and Nanaimo Regional Districts and the municipalities of Kelowna and West Kelowna.
The government says the tax is an effort to target foreign and domestic speculators who own residential property but don’t pay provincial property taxes.
However, there is public concern that this tax could unfairly target British Columbians with second homes.
BC Minister of Finance Carole James has yet to release specifics about the levy but told the Canadian Press that the tax is being redrawn after recent homeowner backlash.
The idea of a property tax on speculators isn’t a new concept to UBC’s Davidoff.
In January 2016, Davidoff and fellow economists released a proposal called the BC Housing Affordability Fund (BCHAF) which included a 1.5 per cent levy.
Davidoff, who is the lead author of the plan, says the aim of the BCHAF surcharge was to target owners of vacant properties and owners who are not Canadian taxpayers — a similar goal of the government’s new speculation tax.
“The idea is you get credits for having lived in the house a long time, or being a retiree or for income tax paid if it’s your primary residence,” says Davidoff.
“So, that leaves empty homes, second homes… facing a higher property tax rate,” he adds.
The economist also notes that Vancouver should consider raising property taxes to align with other big housing markets across the globe.
“A city like Vancouver, for economic reasons, ought to have one of the higher property tax rates in the world but instead we have one of the lowest, which is very hard to defend,” says Davidoff.