B.C.'s new home resale tax may be little more than an election ploy
For Premier David Eby's new home resale tax to truly make sense in British Columbia, it needs three key ingredients that were missing from the government's informal announcement this week: a DeLorean, a flux capacitor and roads strong enough to reach speeds of 88 mph.
Only then can we go back in time, like in a “Back to the Future,” and tailor the anti-flip tax to a point in time when it would have made a noticeable difference, such as 10 years ago or in 2022, post-pandemic.
If anything, a new bill being introduced this spring is likely to be a disappointment, as it would tax property resales even though most properties are not being resold.
“I think this tax is probably a little bit overdue,” said Kaylee Weisman, owner of Victoria-based development and community planning firm Weiser Projects.
“We're seeing a lot of projects not moving and single-family home product not moving due to pricing and the slowdown in the market.”
“If this had been announced a year or two ago, I think it would have had a much bigger impact.”
Wiseman is one of many developers, academics and real estate analysts who believe a resale tax would have little real impact on home prices, rents or the availability of properties on the market.
These conservative projections are backed up by the British Columbia government's own internal estimates, which say the tax would only affect 3,000 to 4,000 home sales per year in a market that typically sees around 100,000 sales per year.
The New Democrats argue that money raised from the tax (which starts at 20 percent of resale profits within the first year of purchase and reaches zero by the end of the second year) would be used to fund new affordable housing projects.
But the projected annual revenue is just $43 million a year, a tiny fraction of the multi-billion dollar real estate sector, or the $2 billion brought in annually from real estate transfer taxes.
“Another reason I think this won't really have much of an impact is because a lot of people who own single-family homes are currently waiting on their properties while considering moves other than selling in the normal market,” Wiseman said.
“So they [single-family multiplex] “Legislation. So I think they're expecting over $40 million a year in revenue. And that's probably an overestimate.”
Governor Eby's bill to allow four-family homes to be built on single-family lots without city zoning could actually lead to developers buying properties, quickly renovating them, and flipping them — but they're actually exempt from resale taxes.
This is a deliberate move, as the state wants to encourage people willing to convert their single-family homes into multiple residential units: People who buy a property to add a second apartment will be exempt from taxes and can resell it without penalty within a two-year period.
“We want to encourage this activity,” Eby said.
“If we had a resale tax that didn't take into account whether you bought a home and turned it into a two-story home or a three-story home, it would reduce the opportunities for people to live in these neighborhoods. It would reduce the opportunities for families to buy their first home, it would reduce the opportunities for seniors to split their homes into multiple units. That's why we put in that exemption.”
While it's likely to have little impact, the resale tax, if enacted, would have two positive outcomes for the New Democrats.
First, it would act as a deterrent when interest rates inevitably fall and the housing market booms again. The idea of a modest surcharge on profits might be enough to dissuade some people from buying and selling homes like they would the stock market, but the government would have a hard time quantifying the impact and boasting about it.
The second is that it will be used as a political weapon in the state elections in October.
New Democrat strategists will twist and sharpen this tax into a political spear to hurl at their opponents during election season, encapsulating it in high-stakes talk about fighting on your side against evil speculators and making housing the people.
In that respect, the resale tax is reminiscent of British Columbia's foreign buyers tax and speculation tax, both of which allowed the government to go after bad actors in the real estate industry while having little actual impact on the underlying issues of supply and demand.
“Families looking to buy a home shouldn't have to compete with home flip investors,” Eby said. “This tax will deter speculators and give home-hunting families an advantage in the housing market.”
You're bound to hear this phrase a lot in the coming months, even though the truth is that the time when a resale tax was sorely needed in British Columbia is long past.
Rob Shaw has covered BC politics for over 16 years and currently works as a reporter for CHEK News and writes for Glacier Media. He is the co-author of the national bestselling book “A Matter of Confidence,” host of the weekly podcast “Political Capital,” and a regular guest on CBC Radio.
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