BC Government Focuses on Major Cities for Speculation Tax

British Columbia Finance Minister Carole James announced tweaks to the province's new tax on real estate speculation Monday while standing behind the principles upon which the government had based the policy.

"Housing is a crisis and a priority for our government," James said in a teleconference with reporters. "We want to make sure in the plan that we've put together that people who live and work in our province are able to find and afford a place to live in their community."

In the February budget James presented a 30-point housing affordability plan that included a speculation tax to be effective for the 2018 tax year. The tax, which was set at $20 per $1,000 of assessed value, was to initially apply in Metro Vancouver, the Fraser Valley, the Capital and Nanaimo regional districts, and the municipalities of Kelowna and West Kelowna.

While the idea was to target properties owned by people who don't pay income tax in the province, opposition MLAs and media reports raised concerns from British Columbians and others whose cabins and vacation properties might be subject to the tax.

In recent weeks both James and Premier John Horgan had responded to questions by saying they were listening to the concerns and there were more details to come.

"We took the responsible approach, which was to take the time, listen to the feedback and work through the details to get the implementation right," James said. She acknowledged the criticism the policy received, but said others welcomed it. "Many people have thanked us."

Changes announced Monday to the tax included the exclusion of properties on smaller islands, in smaller communities and in unincorporated areas. "We're focusing in where the crisis is the greatest, major urban centres in the province, to tackle that housing crisis," James said.

The Gulf Islands, Parksville and Qualicum are no longer included in the tax, but Nanaimo, Kelowna and West Kelowna still are. James said the ministry did an analysis looking at the cost of housing compared to incomes in each community. "It was very clear that Nanaimo is one of those communities that's facing a crisis. That's why they're included."

Kelowna and West Kelowna, where municipal representatives had asked to be exempted, are among the most expensive cities in the country, James said.

Whistler is not included because it's a resort municipality and different from other cities in the province, she said.

The government also adjusted the rate structure so that now British Columbians who are affected will pay 0.5 per cent of the value of their property for the tax. For Canadians from other provinces, it will be 0.5 per cent in 2018, then rise to one per cent in 2019.

For foreign investors and so-called satellite families, where the main income earner lives outside the country, the rate will be 0.5 per cent in 2018, and rise to two per cent in 2019.

Second homes owned by B.C. residents that are worth less than $400,000 will be exempt from the tax to ensure that cabins aren't affected, James said.

Nor will long-term rentals be included, as long as they are rented out for at least six months of the calendar year for periods of at least 30 days. James said the idea is to provide flexibility for students and retirees and encourage people to put properties into the rental market, while discouraging offering them as short-term vacation rentals.

There will also be exemptions in special circumstances, such as when a senior moves into long-term care or a person has died, James said.

"We have a responsibility to act and that's just what we've done," James said. "Speculators and those with vacant secondary homes will pay the tax, or they have the option of freeing up their vacant homes to be homes for people and families who live and work in their communities."

Over 99 per cent of British Columbians won't pay the tax, she said. The only ones who will are people who hold multiple properties and leave them empty in the province's major cities. "People with cottages at the lake, or cabins, or on the islands, will not pay this tax."

The February budget included $200 million in annual revenue from the speculation tax once it is fully implemented and James said she doesn't expect today's tweaks to change that expectation. "We were very conservative when we put numbers into the budget," she said. "We don't expect it's going to make much change to the numbers, but we're certainly going to be monitoring them as we go along."

Andrew Wilkinson, the leader of the BC Liberal Party, spoke to reporters in Maple Ridge. "We're very concerned the NDP is making up taxes by trial and error," he said on a recording of the scrum provided by a spokesperson for his caucus.

The government is creating uncertainty and there's no evidence the new tax will dampen speculation, he said. "The rules keep changing."

BC Green Party Leader Andrew Weaver said it's positive that the government was willing to adjust the tax after listening to British Columbians. With a minority government, the NDP depends on the support of three Green MLAs to win votes in the legislature.

"We have been clear that we needed to see changes to this tax in order to support the forthcoming legislation," Weaver said in an emailed statement. "In particular, the government's policy must target speculation and empty homes in our urban centres without undue adverse effects on rural areas and on British Columbians who aren't speculators."

The changes make the tax more targeted and limit its effects on British Columbians with vacation homes, he said. "These changes go a long way to dealing with our initial concerns with the tax.... We look forward to the full details of the legislation to ensure it truly limits unintended consequences."