The provincial government jumped into the overheated housing market with a bag full of measures it hopes will help ordinary people afford a home. It’s a good move politically. Now we’ll see if it works as intended.
Premier Christy Clark and Finance Minister Mike de Jong had an under-construction building as a backdrop when they made the announcement on Monday, perhaps to underscore their hope that new legislation will help spur more residential development.
They are not the only ones hoping. Government tinkering with the markets is always risky, but people in Vancouver and Victoria see house prices soaring and rental vacancy rates plunging, and they want someone to do something. “Someone,” as usual, translated to “the government.”
The change that generated the most buzz is the new tax on foreign buyers of residential real estate in Vancouver. In addition to the normal property-transfer tax, they will now have to pay an additional 15 per cent tax on the selling price.
That would mean $300,000 more on a $2-million house.
The cash, along with a portion of all property-transfer tax revenue, will go into a new Housing Priority Initiatives Fund. It will be seeded with $75 million, and will put money into provincial housing and rental programs.
The third part of the package is the previously announced decision to end self-regulation of the real-estate industry. The industry had the chance to police itself and blew it. Now a new superintendent of real estate will take on that task.
Also previously announced were amendments to the Vancouver Charter to allow that city to tax vacant homes. Victoria and other cities that are interested can ask for similar changes to the Community Charter.
Listed off, one, two, three, four, it looks impressive. The question is: Will it work? For a long time, de Jong thought it wouldn’t, so he resisted calls for the vacancy tax and the foreign-ownership tax. The government’s change of attitude is more yielding to public pressure than adopting a new economic outlook.
De Jong said Monday that foreign nationals invested more than $1 billion in B.C. real estate between June 10 and July 14. Of that, $886 million went into the Lower Mainland. That’s about a tenth of total real-estate sales in Metro Vancouver over that period, which were $8.8 billion.
In 2015, Greater Vancouver saw $55 billion in residential sales; the total value of real estate in B.C. is $1.34 trillion.
With numbers like those, it seems unlikely that clamping down on a fraction of transactions will improve affordability in Vancouver. But even if it does, it could have the opposite effect in Victoria.
It’s a no-brainer for foreign investors to hop across the Strait of Georgia with their suitcases full of cash and start bidding up houses here, where the foreign-buyer tax doesn’t apply. With our smaller pool of houses, the price pressure would be more noticeable.
Although we hear most often from those who want to buy homes, renters are in a worse situation. The rental vacancy rates in Vancouver and Victoria are about 0.6 per cent. Some prospective renters have run into bidding wars reminiscent of those faced by homebuyers.
If the new housing fund can build more rental units, especially at the lower end of the price scale, that could help many desperate people and families.
Politics and government have a lot to do with perception, and with the public demanding action, the B.C. Liberals had to show they were listening. While we must resist the notion that there is a simple solution, at least the government recognizes there is a problem.
