Global capital is having a significant impact on our housing market, driving up prices for those who live and work in BC well beyond what the average resident can afford. In addition, both international and domestic speculators are treating our houses as commodities to be bought, sold, and traded exclusively for profit, pricing out people with average incomes who live and work in our cities. This situation also has a knock-on effect on the rental market, increasing demand for rental accommodation as more people are priced out of homeownership, and resulting in increased rents as landlords seek to cover their purchase costs.
If government is serious about fixing this crisis, they must restrict the flow of foreign capital into our real estate, and curb all types of speculative activity.
We must restrict the influence of global capital in our housing market and ensure that homes are accessible and affordable to people who live and work in BC.
To do this, we should follow the lead of numerous other countries across the world and restrict foreign purchasing of property in BC.
People who don’t live, work, and pay taxes here should be prohibited from purchasing existing property here. Exemptions should be designed for people who live and work in BC, including permanent residents and those in immigration programs like the Provincial Nominee Program. Exemptions could also be explored to enable international investment in new developments in order to increase supply, as the government of New Zealand has done.
We are in an emergency: the scope and urgency of the affordability crisis mean that a prohibition on foreign purchasing is an appropriate response. Government should undertake a regular review of the state of affordability in BC, and this policy can and should be adapted if conditions change and the affordability crisis eases.
We believe it is critical to implement a tax regime that targets those who speculate in our real estate. This policy could take the form of an annual property tax surcharge, targeted at absentee owners who own property in BC but do not pay adequate income taxes here. This tax must be structured in a way that discourages speculative investment in property, exerts downward pressure on prices, and increases affordability for people who live and work here - it should not just provide a revenue windfall for government. This policy would ensure that people who invest in property here pay their fair share of taxes. Through design specifics and exemptions, government can ensure that people who live, work and pay their taxes in BC are not affected.
This policy should be implemented alongside foreign buyer restrictions: it would target capital that already exists in the market, and it would cover domestic speculators, such as residents of other provinces who own property in BC. However, if government chooses not to pursue restrictions on foreign ownership, it is even more critical that a speculators tax is included in the budget.
Government should take steps to discourage short-term flipping. As speculators buy and sell properties within a short time frame, they often reap significant profits and drive up the prices of real estate well beyond the reaches of people with average incomes.
To curb this activity, government should impose an additional “flipping” tax on the profits gained by buying and selling properties within a short time-frame. The tax should be levied on a sliding scale with the highest rate imposed on properties sold within a year, reducing to zero over a given number of years.
By creating “bare trusts” and transferring beneficial ownership of a property without changing the title with the Land Title Office, individuals and corporations are able to avoid paying property transfer tax. This loophole is costing the government massive sums of money in lost tax revenue and is enabling large-scale tax avoidance. Government must close this loophole by applying property transfer tax to the transfer of beneficial ownership.
There are holes in the foreign buyers tax that severely limit its effectiveness and allow many people to avoid paying the tax altogether. For example, it does not apply to pre-sales of condos, partnerships, or purchases of ALR land. These loopholes must be fixed. Furthermore, the tax should not be solely restricted to Vancouver; local governments should be given the ability to opt-in to the foreign buyers tax. These changes should be made if government chooses not to pursue broader restrictions on foreign ownership.
One particularly harmful aspect of our housing crisis is the impact it is having on our agricultural land. Speculation has spilled over onto ALR land, driving up prices well beyond the reach of local farmers and resulting in mega-mansions being built on prime farmland. Action is needed to protect our food security and the ability of farmers to purchase farmland.
If the province does not restrict the foreign purchase of property altogether, government should prohibit foreign individuals and corporations from purchasing ALR land over a certain small number of acres, as is done in many other provinces across Canada. Government should also work with local governments to restrict allowable house size on all ALR land, including establishing enforceable house size regulations if needed.