Wealthy foreign millionaires holding condos and houses vacant for most of the year were clearly identified as a social problem in metro Vancouver several years ago.
But lots of Canadians are lumped in with them under the current working definition of the problem in the NDP’s speculation tax. They’re stewing about the implications.
Jeff Johnson, owner of a cabin on Horne Lake, is one of them. He bought the 40-year-old property a dozen years ago for $180,000. It’s appraised at $350,000 now and in that area, it costs $2,300 a year in taxes and strata fees.
That’s going to jump by about $1,750 this year when the first taste of the speculation tax appears. The full impact will be $7,000 by next year. It’s payable because the cabin is within the new coverage area of the Nanaimo Regional District and it’s vacant much of the time.
It’s a 750-square-foot cabin on a gravel road off the grid. No power, no piped water or sewer service, no fire protection and no utilities. Year-round residency is prohibited by zoning regulations. So renting it is virtually impossible.
“We are not speculators,” Johnson said from his home in northern Alberta. “If we wanted to flip it, we would have done so years ago.”
Johnson was a cabinet minister in the governments of Alberta premiers Alison Redford and Jim Prentice. He has a perspective on how national and provincial taxes are supposed to work.
He said Canadians have a right to the expectation of being treated equally across the country. B.C. treating other Canadians as foreign buyers bothers him.
Also problematic is how the tax squares with the interprovincial agreement B.C. has with Alberta, designed to promote free trade and the portability of investment and labour.
Johnson sat on the Treasury Board when Alberta cabinets considered affordable housing measures. Fort McMurray a few years ago had the same runaway prices B.C. has seen through.
One of the points debated was the thousands of non-Albertans (many from B.C.) working the oilsands from fly-in camps. They worked in Alberta, collectively imposed a huge demand on Fort McMurray, but paid taxes at home.
“It was a massive bleed of income, but we decided not to tackle it,” said Johnson. He said they opted against it because it would have violated the trade deal and also the understanding of how Canada works.
“There’s always give and take across the country. But it’s frustrating to realize we are now being penalized.
“It’s incredibly disappointing and troubling because we [Alberta and B.C.] have had such a fantastic relationship for a long time.”
B.C. owners of second homes also look to be on the hook, although they can escape some of the new tax load through an income tax deduction.
The vague outline of the tax was presented in the February budget, and full details on the application of it are expected in the spring, with legislation coming in the fall.
It’s easy to picture Finance Minister Carole James relenting slightly on B.C. taxpayers who now look to be caught in the net.
They’re getting a protest campaign underway that’s going to produce some noise. They’ve got the backing of some local governments. And they appear to be more like collateral damage than the intended targets.
It’s slightly harder to picture the NDP retreating to the point of letting out-of-province owners of vacant homes off the hook.
James has repeatedly stressed how “bold” she wanted to be.
Eighteen months ago, B.C. had a wide-open real-estate market. Now there’s a speculation tax that will quadruple by next year. The two-year-old foreign-buyer tax has been hiked to 20 per cent from 15, and applied to four more regions outside Vancouver. The property-transfer tax has been hiked on homes over $3 million. And the provincial school tax on homes over $3 million also increased.
It’s a wide-ranging effort to drive down a real-estate market that has likely already peaked.
If dinging Albertan “speculators” in unserviced Horne Lake cottages $7,000 a year is what it takes to be bold, the thinking in government seems to be: So be it.
