The British Columbia government has announced plans to impose a tax of up to 20% on gains made on property sold within two years of purchase.
The 20% tax rate applies for one year after purchase and reaches zero between 366 and 730 days after acquisition.
B.C. Finance Minister Kathleen Conroy announced the tax as one of the province's latest measures to curb housing speculation in a province where many people struggle to afford a decent home.
“Prices have risen because governments have stepped back and speculators have moved in,” Mr Conroy said in a speech to parliament announcing the latest Budget.
“That's why we're introducing the Home Resale Tax as the latest measure to crack down on bad actors.”
The tax is one of 20 bills the government plans to introduce this session and must be passed within the next three months to become law.
The new rules will be introduced for properties sold after January 1, 2025. They will also apply to properties purchased before that date.
Governor Conroy's 2024-25 budget projects that the tax, if implemented, could bring in an additional $43 million in revenue in 2025-26.
The proceeds will go directly to building affordable housing across the state, she said.
A document from the British Columbia government's proposed 2024/2025 budget, which includes a new tax on people who sell their homes within two years of buying them. (Maggie MacPherson/CBC News)
Sellers are subject to a tax of about 10 percent after owning the home for a year and a half, but are exempt from the tax after two years of ownership.
The tax applies to income from the sale of real estate with dwelling units and real estate designated for residential use. It also applies to income from the transfer of condominiums.
This does not apply to land or parts of land used for non-residential purposes, according to government budget documents.
Other exemptions from this tax include life circumstances such as separation, divorce, death, disability or illness, relocation, involuntary unemployment, changes in household composition, personal security or bankruptcy.
“The purpose of the tax is to support housing supply, not hinder it,” the government's budget document states.
“Exemptions will be given to those who are increasing housing supply or engaged in construction and real estate development.”
This tax is paid in addition to any federal or other state income taxes incurred on the sale of real estate.
A chart from the 2024/2025 provincial budget shows how taxes on selling a new home within two years of purchase will decrease over time. (B.C. Government)
Alex Hemingway, senior economist at the Canadian Centre for Policy Alternatives, said the tax is another tool to tackle speculation, but it's unclear how successful it will be.
“A resale tax might take a little bit of the air out of the speculation side of things, but I don't think it really addresses the root of the housing crisis, which is the overall housing shortage and especially the shortage of non-market housing.”
He also said the tax could inadvertently reduce home sales and transactions, draining tax revenue from property transfers.
First-time home buyer credit
The budget also introduced an expanded real estate transfer tax exemption and increased the First Time Home Buyers Program threshold to $500,000 for the purchase of a home worth $835,000.
The state said the measure will result in savings of up to $8,000 per purchase and double the number of buyers benefiting to about 14,500.
The state will also exempt real estate transfer taxes through 2030 on qualified rental-only buildings with four or more units.