KENNETH CHAN (DAILY HIVE) - The BC NDP government has announced major changes to how the new Speculation Tax (ST) on housing will be implemented.
During a teleconference with media this afternoon, BC Finance Minister Carole James said 99% of British Columbians will not pay the ST on the value of their residential property. This ST goes into effect during the 2018 tax year.
“British Columbians who own their own homes do not pay the speculation tax. British Columbians who are landlords do not pay the speculation tax. British Columbians with cottages and cabins in rural areas do not pay the speculation tax,” said James.
“The goal is to ensure speculators will not be able to treat our housing market as a stock market at the cost of British Columbians and also to provide incentives for people who own multiple properties to rent them out so that they become a part of the housing stock and community.”
Geographical areas the ST will be applied
James “refined” the geographical zones the ST will go into effect, with the new tax now restricted to the following five urban centres:
“We’ve refined the geographical areas the tax applies to. We’ve excluded most smaller islands and communities and unincorporated areas. We are focusing in on where the crisis greatest – major urban centres in the province – to tackle the housing crisis,” said James.
“This will help ensure British Columbians’ vacant vacation homes and cabins are not impacted.”
Additionally, a new rate structure for the ST – based on the value of a residential property – has been released:
“Only those who hold multiple properties and leave them empty in our province’s major cities will be asked to contribute. Our tax on speculators focuses on people tying up housing stock in BC’s overheated housing market and taking that housing stock out of the communities… We are going after those who are clearly taking advantage of the market and driving up prices.”
Landlords and those who own a secondary home such as vacation homes and cabins will be exempt from the ST.
Secondary properties utilized as long-term rentals – homes that are rented out for at least six of the year for at least 30 days at a time – will be exempt from the ST.
Those who have homes governed by strata policies that forbid rentals will initially be exempt from the ST. James says properties under these situations will be temporarily grandfathered into the system.
British Columbians with a second home valued up to $400,000 will be exempt from the tax through a non-refundable $2,000 tax credit that is immediately applied on the speculation tax. It will offset the tax payable for the home.
Exemptions will also apply for some special circumstances, such as a senior citizen who is entering a long-term care facility and the property of a deceased family member that is going through the probate process.
Implications of the ST changes
When asked whether the ST will affect the volume of housing that developers will build, James said that will not be the case if developers are targeting locals only.
“This will not impact the supply if those developers are looking to sell to British Columbians,” she said. “It will not impact the supply at all. If you have a specific developer who is targeting a speculator from overseas, who is targeting foreign speculators, then yes they will have to pay this tax.”
In last month’s provincial budget, forecasts show the new ST will add $200 million to the provincial government’s revenues in the 2019-20 fiscal year, but James says the changes are not expected to significantly impact the forecast.
“We were very conservative when we put the numbers into the budget. We, in fact, made sure we were conservative with those numbers, and we were not targeting British Columbians,” said James.
“We do not anticipate it will make much change to the numbers, but we will certainly be monitoring them.”
Today’s announced changes follow weeks of outcry and backlash since the budget announcement, with developers claiming the ST will suppress overall housing supply. It also sparked concerns from BC residents who own second homes as vacation properties but are not speculators.
PATRICK BLENNERHASSETT (BUSINESS IN VANCOUVER) While they aren’t designated heritage monuments by the City of Vancouver, the Georgia and Dunsmuir viaducts, twin bridges that span 2.6 kilometres and weigh 67,800 tonnes, are historic city structures.
Relics of a past vision of the municipality, they were the only substantial infrastructure projects, along with the Granville Street Bridge, to be completed during the city’s civic revolt of the late 1960s and early 1970s when protesters fought plans to drive a major freeway through downtown.
Now the two massive concrete structures, built from 26,500 cubic metres of concrete – the equivalent of 10 Olympic-sized swimming pools – are coming down, making way for a drastically new vision of northeast False Creek that will take decades and hundreds of millions of dollars to achieve. Right now daily volumes on the viaducts range from about 14,000 vehicles crossing the Dunsmuir structure to 21,000 on Georgia, numbers that have been decreasing since 1996.
Patrick Condon, a professor of urban design at the University of British Columbia’s School of Architecture and Landscape Architecture, noted the viaducts are owned by the city and not the province, which makes repairs more costly. Structures of their kind have a typical lifespan of about 40 to 60 years, which means the latest version of the viaducts, which were completed in 1972, are at the end of their structural lifespan, he said, adding that they are not up to current seismic standards and have other technical issues due to their age.
Demolishing them will carry a weighty price tag, he said.
“It’s quite expensive because you have to do it carefully. You have to take the pieces apart almost manually, and then there are removal costs and dumping costs. There are a lot of costs that people don’t imagine. Just removal and dumping costs can be a significant percentage, and that’s after you’ve torn the bloody thing down. It’s a really massive structure.”
According to a city report issued in January, the cost of removing both viaducts could top $200 million.
The city’s vision for the area after removal of the viaducts is ambitious. The redeveloped northeast False Creek, which will take decades to complete, will house upwards of 12,000 new residents and include 1,800 new social housing units and 32 acres of renewed and new park space. The city also estimates an economic benefit to the public of $1.7 billion when development is completed, factoring in 8,000 new jobs. Devan Fitch, manager of project delivery for engineering services at the City of Vancouver, said the “big, dramatic change” to northeast False Creek represents about $360 million worth of investment to take the viaducts down and build a new community. This will eventually encompass a streetcar network, Fitch said, but the immediate issue is revamping the area to modern traffic patterns and building a sustainable transit grid.
“There’s a big challenge to get a resilient network in place,” he said. “There’s a legacy of poor connectivity when it was a railroads and industry site. The rest of the network [was] bypassed … as the viaducts went overtop, so as we try and restitch this network back together that’s certainly a challenge we need to deal with.”
Fitch said the city has had high-level talks with some of the main tenants of the area, most notably Rogers Arena, BC Place and Costco.
The city’s report also noted the viaducts will be replaced with a new Pacific Boulevard and Georgia Street and that studies have shown the new street network will be able to handle “100% of the current and future traffic volume and will be better adapted to accommodating improved options for moving around the area.”
Brian Higgins, a real estate agent with Prompton Real Estate Services Inc. in the Marinaside area, who previously lived next to the viaducts, said he’s pleased with the plan for the area as envisioned by the city and by landowner Concord Pacific. The municipality didn’t “sell its soul” with the mixed-use development plan, he said, as there is a wide variety of amenities in it, including social housing, restaurants, commercial space and parkland.
Keith Sashaw, president of the Association of Consulting Engineering Companies of British Columbia, said he thinks removing the viaducts is a good idea, noting the decline in traffic on the structures.
“What we see in Vancouver is that we’re actually seeing fewer people drive into the downtown core, and that’s steadily declining and that’s improving transit and cycling. And this is with more people living in the downtown core, so I think it’s a very good move.”
FRANK 0'BRIEN (BUSINESS IN VANCOUVER) The February 20 provincial budget emphasized affordable housing, particularly in Metro Vancouver. Guidelines for rentals built under a city incentive program now define that for Vancouver: affordable rent is $1,750 for a one-bedroom and $2,505 for a two-bedroom apartment.
“Those rates will likely go up next year,” said Josephine Kwan, a spokeswoman for Spire Development, which will open a 95-unit rental project this fall in southeast Vancouver that is part of the city’s Rental 100 program that offers incentives to rental developers.
Without incentives, the six-storey Spire building near Fraser Street and East 57th Avenue would likely have one-bedroom rents above $1,900, which online rental search service PadMapper recently estimated was the city average, Kwan said.
The Spire provides perks that no existing rental project in the city could match. For example, the largest multi-unit passive-house development in Canada would reduce energy bills for tenants by approximately 90% compared with a similar-sized building not built to passive-house specifications. The passive-house concept originated in Europe. It is characterized by very thick walls with extra insulation, an airtight envelope, a heat-recovery ventilation system that brings in fresh air without any heat loss, and high-efficiency doors and windows.
Passive house is endorsed under the City of Vancouver’s Greenest City strategy.
Pete Rackow, co-founder of Spire Development, said passive-house construction costs are higher than those of a traditional building.
“However, the final product is much superior in terms of air quality, noise reduction and carbon footprint,” he said. “With the city’s support, we now have the perfect opportunity to revolutionize the rental experience for Vancouverites, especially given our current housing crunch.”
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