The B.C. government is examining a proposal for an “affordable housing fund” generated by a tax targeted at non-resident investors and speculators, Premier Christy Clark said Tuesday.
The concept by a group of university business school academics could help loosen the tight rental market by encouraging owners of vacant homes to rent them out, Clark told reporters at a tech conference in Vancouver.
But the premier also said administering such a tax is fraught with challenges, including making sure residents who periodically leave their homes vacant for professional or personal reasons aren’t side-swiped.
“(It) would also open up more rental market for people, because I assume if there were a financial penalty people might rent out their homes so someone is living in them,” she said. “It is one of those things, it’s a really good idea but the execution is really hard. So that is why we are giving it a hard look but it may take a little while to work through.”
At the same time, the premier hinted her Liberal government will unveil new changes to home ownership incentives in the Feb. 16 provincial budget to make it easier for first-time home buyers. She would not provide details.
“There are things government can do to support new home buyers in particular getting into the market. You will see more of that in the budget,” she said.
The Liberals have hinted they are willing to increase the exemption for first-time home buyers to the property purchase tax.
On Monday, 10 business, economy and finance professors at the University of British Columbia and Simon Fraser University proposed a B.C. Housing Affordability Fund that would collect a 1.5-per-cent real estate surcharge from property owners “with limited residential or economic ties” to B.C. They suggest the fund could conservatively raise $90 million a year in Vancouver alone, which could then be distributed as lump-sum payments to all Canadian tax filers in the collecting region.
Thomas Davidoff, one of the proposal’s authors, said he was pleased to hear the premier is interested in the idea. But he’s disappointed Clark isn’t willing to include it in the February provincial budget and instead may increase the property purchase tax exemption, something he says doesn’t create real affordability for people who don’t have money to buy a home.
“I think when we sent the proposal to the government six months ago, affordability was not so much on their radar screen. I think it clearly is a priority now,” said Davidoff, an associate professor of business economics at the University of B.C.’s Sauder School of Business. “It is unfortunate they aren’t considering it for the provincial budget. We think it could be put in place fairly easily.”
The professors’ tax proposal was also endorsed by both the opposition New Democratic Party and a senior Vancouver councillor, but with a twist. Both David Eby, the NDP housing critic, and Coun. Geoff Meggs, the chair of the city’s finance committee, said they would want any money collected to be used by local governments for affordable housing incentives rather than being rebated to individual tax filers.
Meggs said if the academics’ estimates proved true, the fund could translate into 116 more affordable units annually in Vancouver alone, based on an average construction cost of $250,000 per unit.
“We have seen the senior governments leave the housing field, so it is great news that the premier is looking at measures to improve affordability,” he said.
Eby said Clark’s comments are a change from recent statements in which she seemed not to care.
“Just a few months ago, Christy Clark told CTV that if people are concerned about housing affordability they should move to Fort St. John or Prince Rupert,” he said. “It is a sign to me that the pressure we are putting on them is working.”
But the premier also blamed local governments for contributing to the high cost of new housing and said they can do more to cool the market.
“Local governments, city halls, load in some cases over $100,000 per unit in taxes and charges on to every single new home. There is a lot local government can do to reduce the cost of new homes by reducing the taxes and fees they levy on them,” she told reporters.
That’s a hollow argument, according to Meggs, who said there is no evidence that fees the city charges developers for required community services are to blame.
“I think the price of housing is set by the marketplace. And if we reduce our (community amenity contributions) there will be increased profits to the developer but the price won’t come down,” he said. “The private sector does not operate on a charity basis, so if there is money from the sale of a house they will take that as a return on investment, not dutifully pass it back to the taxpayer to reduce the cost of housing.”