theQuestion: Should the province implement the proposed 1.5% vacant landlord tax?*
When it comes to a new tax, the devil is always in the details. Such is the case with the plan concocted by a cadre of university academics to combat the scourge of vacant properties littering Metro Vancouver.
I agree we have a serious problem. There are countless ghost neighbourhoods with houses sitting empty, and numerous downtown condo towers where cleaning and maintenance staff outnumber residents.
The professors propose the provincial government create a B.C. Housing Affordability Fund, which would be capitalized from an annual 1.5% surcharge targeting owners of vacant properties or those with limited participation in the Canadian economy.
Petr posited no argument in favour of this tax. He simply outlined the problem as being driven by foreign buyers, then states “far from restricting foreign buyers, it represents a tiny adjustment to discourage massive speculation.” This is confusing. Is the purpose to incentivize landlords to rent out vacant properties as opposed to leaving them empty? Or to dampen speculation? It’s the former, not the latter.
The truth is the new tax would do nothing to discourage the vast number of foreign investors from parking money in B.C. real estate. Petr is right, the tax is a tiny adjustment — which the foreign elite could easily absorb. But the surtax would have a massive negative impact on local homeowners and the economy.
As reported in this paper, lead author and UBC economist Joshua Gottlieb says the 1.5% surcharge would apply to all homeowners — foreign and local. Everyone first pays, but those who can prove they live in their home or rent it out would receive their money back when they file income tax.
Consider you own an entry-level condo valued at $325,000, you would be required to pay the government $4,875 for the year. Amortized over 12 months it’s an additional $406 on top of your mortgage and fees. Sure you would get a tax credit of $4,875 at the end of the year, but this is your money out of your pocket. You earn no interest and you can’t spend it. Hundreds of millions of dollars will be ripped out of the economy and parked with the government. This plan means 1.5% of the value of the entire housing market would be loaned to the government, interest free.
This plan should be dumped.