Linked: A Housing Speculation Tax and Transportation Funding
The two hot issues in the Lower Mainland are the cost of housing and how to fund Translink. Some argue for a tax on non-resident buyers of housing who flip their units for profit. Indeed, many new condos are marketed in Hong Kong which, ironically, taxes such practices there. Might such a tax help fund Translink, which provides public transit and major road operations in Metro Vancouver?In 2011, the Black Press newspapers Surrey and North Delta Leader made this ‘radical proposal’ in an editorial. Is it time to resurrect that innovative idea? Chris Bryan, Editor, Burnaby NewsLeader & New Westminster NewsLeader, and SFU City Program Director Gordon Price will start a conversation exploring the possibilities and challenges. Then it’s your turn to question and comment.
When: September 18, 2014
Time: 12:30-1:30pm
Location: Room 1600 at SFU Harbour Centre
Cost: Free
I would try to have the answers to a few questions before setting this tax into motion.
What is the potential upside, in terms of revenue per year, from this tax? Is this actually a useful amount?
What costs are involved in tracking down the non-resident buyers, applying and collecting the tax and distinguishing “desirables” from “undesirables”. Certainly a few new bureaucrats and some sort of appeal panel.
Does this new tax address any major problems, other than increased city revenue? Might it, instead, simply create a service industry of surrogate buyers’ and sellers’ agents?
More delicately, is this simply a thin disguise placed upon Vancouver’s latent racism? Is it demonizing some ethnic group to feed the uglier part of the city’s population?
Is this municipal, provincial or federal jurisdiction? CRA already has several areas of concern with respect to non-residential property transactions — including withholding on rental income, and purchaser payment holdbacks pending seller getting a CRA clearance certificate following capital gains tax payment, if any.
In Hong Kong and Singapore, the gov’ts have implemented a “stamp tax” on non-resident property purchases. The tax varies from 4% to 20% depending on a number of factors including “flip time”. More detail here: http://www.moorestephens.com.au/resources/more-tax-non-resident-property-buyers-singapore-and-hong-kong
Here are some thoughts from Bloomberg’s Neil Callanan on London (UK) and their plans, positioned as dealing with a UK capital gains tax (CGT) oddity. Note particularly the estimated revenue, which if factored for Vancouver’s size, looks low. http://www.bloomberg.com/news/2013-12-05/osborne-to-extend-capital-gains-tax-to-foreign-u-k-home-buyers.html
Further discussion on the UK’s plans from Forbes’ Carla Passino: http://www.forbes.com/sites/carlapassino/2013/12/05/britain-to-charge-cgt-to-non-resident-real-estate-owners/
Ken, I don’t really see your classification of Vancouver as racist accurate. The region and its residents have welcomed wave upon wave of immigrants for years and we have been getting along reasonable well. If you haven’t already please read the following article:
http://www.theglobeandmail.com/life/home-and-garden/real-estate/in-vancouver-race-undercuts-the-discussion-on-affordability/article19873510/
Ron: Please don’t misquote and disfigure my opinion.
There is latent racism in Vancouver, and there is an uglier part of the population. Of this there can be no doubt. The questions are: how big is the ugly part, and how much does this latent racism play a part in public life?
Fair enough
Looking at Singapore’s tax, I see that it applies to residents and non-residents, residential and commercial properties. It is a “stamp tax” paid upon a property sale, that rises as the “flip period” shortens.
http://www.moorestephens.com.au/resources/more-tax-non-resident-property-buyers-singapore-and-hong-kong
Rather than isolate non-residents, is it possible that we should also be looking at property-flipping residents as both a driver of unaffordability and a potential source of revenue? Is this an untouchable third rail of political danger, whereas offshore ethnic groups are a safe target?
I think the city and region could argue this way. The intense efforts to make the region livable are in part responsible for the property capital gain potential, and so the region should be allowed to participate in some of the profits now being reaped by speculators.
Agree with the idea that we focus on the speculative nature of the problem rather than the supposed nationality of those doing it. New York has a similar tax in place, levied by both the State and City. No distinction on nationality, simply on property types (residential vs. commercial, at the City level):
http://www.tax.ny.gov/bus/transfer/rptidx.htm
http://www.nyc.gov/html/dof/html/business/rptt_refunds.shtml
Tax revenue increases in hot real estate markets, decreases in cooler real estate markets. Not sure whether this meets transportation goals, or whether a counter-cyclical source is preferable?
I find Singapore’s approach (tax changing as an inverse of the length of time the property is held) as somewhat more appealing if the objective is reducing speculation, but would be interested in seeing what it did to property market liquidity.
Not sure I see a nexus between this funding source and transportation investment necessarily, but maybe that’s of lesser importance?
Good call Gord.
I’m working on a future column on this proposal, plus B.C. Chamber proposal to take property transfer tax off primary residences (an indirect tax on empty homes– similar, but deftly tied to reducing an unloved tax, which means support from homeowners and the real estate industry) and Meena Wong’s call for a tax on vacant homes (maybe get her to your meeting?!)
What do you think about Kevin Falcon being the figurehead for the referendum?!!
I sense some racist undertones in the proposals, but I have always tried to make it clear that my issue is with the use of housing as a business or speculative investment venture. Whether you’re a Canadian with 4 properties or a foreign non-resident with 1 makes no difference to me.
While it’s nice for investors to rent their otherwise vacant homes because it increases the supply of rental suites on the market, doing so is a business. One could make a strong ethical argument that running a business should be subject to commercial taxes instead of residential ones. Leaving a home vacant or tearing it down is simply a rental with zero income.
Any possible solution needs to be simple to understand and administer. Here’s one proposal:
Apply commercial property taxes on all residential areas as the default.
Land zoned for and actually containing housing would be eligible for a lower tax rate provided that the legal owner meets eligibility criteria.
A qualifying resident owner is an individual or couple with Canadian citizenship or permanent resident status who declares that dwelling unit as his/her/their primary residence.
To avoid loopholes no other person, agent, group, organization, trust, etc would qualify.
Qualified Canadians declaring primary residency in a co-op or strata corporation could result in the application of a pro-rated tax to that property.
The primary residence declaration could be collected by the Federal Government as part of the existing income tax system and made available to provincial and municipal tax authorities.