Premier John Horgan and Finance Minister Carole James say the government is still working out the details of a new speculation tax on B.C. properties.
It’s a discussion their colleagues in the legislature will be keenly interested in, as many of them own two or more homes in the province.
Horgan said the government has delivered on its promise to put in place a speculation tax. But the announcement has sparked concern from owners of vacation homes who fear a hefty tax bill.
“We haven’t laid out the details,” Horgan said. “Now we’re making sure the minister of finance, with the assistance of British Columbians, will be able to fine tune that so we realize the objectives of the tax and also go forward in a way that makes sense to people.”
The February budget included a speculation tax that will be effective for the 2018 tax year. The government said the tax would initially apply in Metro Vancouver, the Fraser Valley, the Capital and Nanaimo Regional Districts, and the municipalities of Kelowna and West Kelowna.
The tax was to target properties owned by people who don’t pay income tax in the province. It will be $5 per $1,000 of assessed value this year and in 2019 will rise to $20 per $1,000 assessed value.
That means that someone with a $1-million property covered by the tax would be looking at a $5,000 tax bill for 2018 and $20,000 in 2019.
“This tax will target foreign and domestic speculators who own residential property in B.C., but don’t pay taxes here, including those who leave their units sitting vacant,” materials released with the budget said.
The tax won’t apply to “most principal residences, qualifying long-term rental properties and special cases,” the government said. “The province will also introduce a non-refundable income tax credit which will allow those who pay income tax in B.C. to offset the property tax.” Revenue Canada defines a “principal residence” as one that the owners occupy for at least part of the year and designate as their main residence.
Since the budget, questions have been raised about how the tax will affect vacation homes and people who pay income tax in B.C., but less than they would owe for the new tax.
They could be left paying more in the speculation tax than they receive from the offsetting income tax credit.
James said legislation is coming in the fall and people will have the details before the tax is in place.
“We’re taking time to make sure we get the implementation right,” she said. “We are looking at all the specifics. As I’ve said the speculation tax is to get speculators who are using our housing market as a stock market out of the business. We are not aiming at British Columbians who have cabins, and details around all of that will come.”
The tax is a bold measure, she said. “We want to get speculation out of the market. We know it’s a problem in our housing market. We know we have to address it. We know British Columbians expect us to address it. It was ignored by the previous government. We’re acting on it.”
That action could affect dozens of the province’s 87 MLAs and their families based on their public financial disclosure statements. The statements also give a window into how complicated many people’s real estate dealings are.
Horgan, for example, has a one-third interest in an investment property in Victoria. As long as it’s rented for the long-term he’ll be exempt from the speculation tax, but not if it’s sitting empty.
James owns not just the home she lives in, but she is also the joint owner with a family member of a second home in Victoria. Presumably that home is her relative’s principal residence, which would make it exempt.
But what about out-of-town MLAs who use the allowances — from $12,000 to $19,000 a year — provided for housing in the capital to help buy second homes? On the NDP side they include Bruce Ralston, Selina Robinson, Ravi Kahlon and Rachna Singh.
Shane Simpson and Scott Fraser each disclose owning a half share in a Victoria home and principal residences elsewhere. Fraser also owns an investment property in Parksville. Leonard Krog has an investment property in Victoria and a recreational property at Black Creek.
Claire Trevena owns a second home in Victoria and an investment property on Quadra Island. Spencer Chandra Herbert owns a second home in Victoria, but also has an investment property in Vancouver and a 50-per-cent interest in a recreational property in West Vancouver.
Michelle Mungall owns a second home in Victoria, two investment properties in Nelson and a third in Castlegar. All three investment properties are outside the regions where the new tax is to apply.
David Eby, by the way, owns a home in Victoria, but not in Vancouver where the constituency he represents is.
On the Liberal side, MLAs owning a second home in Victoria include Marvin Hunt, John Yap, Mike Bernier, Ralph Sultan and Jordan Sturdy.
“There’s no consideration around ‘special’ for one group or another,” James said when asked how the new tax may affect MLAs with second homes in Victoria. “We’re going to look at all of the questions and issues that have come forward and we’re going to make the decisions and bring the implementation forward.”
Among the Greens, Andrew Weaver owns a recreational property in Parksville and two investment properties in Victoria. Sonia Furstenau’s spouse has an investment property in Victoria.
Several MLAs also have recreational properties. Cabinet minister Judy Darcy has a recreational property on Mayne Island, which is included in the areas where the tax will apply. NDP MLA Janet Routledge owns a recreational property on Mayne Island and a timeshare in Whistler.
Peter Milobar shares with family members a cabin on Shuswap Lake. Greg Kyllo and spouse have a 50-per-cent interest in a recreational property at Silver Star in Vernon.
Others hold investment properties that are likely rented out. Bob D’Eith’s spouse has an investment property in Langley. Raj Chouhan’s spouse has a one-third interest in a Burnaby property. Teresa Wat owns an investment condo in Vancouver. Norm Letnick’s spouse has an investment property in Kelowna. Mike de Jong has an ownership interest in half a dozen investment properties in Abbotsford.
And then there are the oddities, situations where it’s unclear what would count as a principal residence and what wouldn’t. Michael Lee lists ownership as a trustee for a family member on a house in Vancouver (other than his residence), as does his spouse. His spouse also has a one-seventeenth interest in agricultural property in Langley.
Anne Kang and her spouse each own residential properties in Burnaby. Katrina Chen co-owns a residence in Vancouver with family and has a second home in Burnaby with her spouse. Ian Paton owns a home in Delta while his spouse owns one in Abbotsford.
George Heyman has a house in Vancouver, but with his spouse has a second house in Vancouver and a recreational property at an unspecified location in B.C.
Other properties are unlikely to be affected. Katrine Conroy has grazing land in the Kootenays, for example. John Rustad owns a wood lot license and four other pieces of rural property.
Several MLAs have interests in properties that are clearly out of reach of the tax. Doug Clovechok has an investment property in Calgary. Tracy Redies owns investment properties in Saskatoon and Virginia. Rick Glumac’s spouse has an investment property in Denver. Mike Farnworth has an investment property in the United Kingdom. Jagrup Brar has interests in properties in Alberta and India and Harry Bains has land in India.