The B.C. government’s planned Speculation Tax on second homes owned by both British Columbians and out-of-province residents has become a hotly debated topic in the communities where it will be implemented.
But it’s not just the tax that is controversial. It is also the choice of where it will be put in place.
Despite housing availability and affordability concerns across the province, the tax is only slated for the Lower Mainland, the Fraser Valley, the Victoria and Nanaimo regional district areas on Vancouver Island and Kelowna and West Kelowna.
While in the early stages, West Kelowna’s mayor and council were much more openly vocal in their public opposition to the tax than members of Kelowna council—which, while also opposed preferred to try and work behind the scenes to have it scrapped—in recent weeks that has changed and Kelowna’s current mayor and councillors have been speaking out publicly against the tax in much strong terms.
The proposed tax would slap a levy of 0.5 per cent of 2018 assessed value on a second property owned by both B.C. and out-of-province owners starting next year, and would increase to two per cent of 2019 assessed value in 2020 for foreign owners. That year, the levy would also increase to one percent for out-of-province Canadian owners.
The tax is expected to become law later this fall and while the premier and finance minister have heard the concerns of both Kelowna and West Kelowna officials directly, both have made it clear the tax will be implemented despite saying tweaks may be made.
The province believes the tax will make housing more affordable and available in the affected municipalities but both Kelowna and West Kelowna say all it is doing is hurting a range of municipal areas including development, construction, jobs, tourism and economic development.
Today the Kelowna Capital News is asking candidates running in the upcoming civic election: What impact do you feel the speculation tax will have on your city? What would you do to mitigate/capitalize on the effects?
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Kelowna mayoral candidates:
I believe the speculation tax will do nothing to improve housing costs in Kelowna and only adversely affect our city overall. It is just another tax grab by the current provincial government. And I hope it does become an issue in the next provincial election. If someone can afford a high-end home here for their retirement or speculation and wants to rent it out or leave it empty part of the year, that is their business and they are certainly still contributing to local property taxes. They could also possibly help with the shortage of rental housing experienced at all levels. I hope we can drag our feet on co-operation with the province on this issue.
My concerns with the speculation tax are the unintended consequences that don’t actually address speculation in real estate. To be clear, these concerns do not in any way detract from both council’s and my full support of efforts by the B.C. government to house the homeless through the addition of 114,000 rental units over the next 10 years. Nor, our commitment to creating an environment for affordable housing. As it stands, the speculation tax is not equitable because true speculators can simply purchase in neighbouring communities. Already, vital sectors of Kelowna’s economy – particularly construction and tourism – are suffering hurting hard-working residents in trades and tourism plus our local suppliers. So, what is being done? For any new tax policy, I’ve called for a full economic analysis and, in consultation with council, using good data before pushing through policy. The UBCM report A Home for Everyone, which city staff agreed with, provides well-researched, data-based recommendations to manage actual speculative housing activity, rather than simply taxing homes that are vacant or used occasionally. This can be achieved using a true speculation tax that does not unfairly single out Kelowna. Further, any new revenue generated from taxation in our community must remain in the community, for local needs. At the municipal level, council has limited ability to affect change related to land-use and the development approval processing. Working with the federal and provincial governments who do have the ability, we can prevent real estate speculation to ensure housing affordability and prevent homelessness.
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I can 100 per cent say I am not a supporter of the new speculation tax. This initiative put forward by the NDP government is an example of how government often disregards what is truly best for the citizens and our province in order to carry out political agendas that benefit their party first and foremost, regardless of the cost to the people. The NDP government is comparing the buying and selling of homes in B.C. to that of the stock market. I have a very hard time comparing the ease of trading stocks to the purchases and sales of homes. You can have zero credit and invest in stocks but in order to qualify for a mortgage and take the proper avenues to purchase a home, there are many steps you must complete. Home ownership is something people should be celebrated for and not punished. If someone is fortunate enough to buy multiple properties, then not only do I respect their position as an investor, I respect their position as someone who can provide shelter to the many people who just simply are not in the position to be a homeowner. As mayor of Kelowna I would lobby against this unwelcomed tax and encourage all communities to band together creating a coalition that is a unified front to battle this issue. This type of movement is very similar to buying groups in business and can have a very powerful presence at the bargaining table.
In my (Kelowna) Chamber of Commerce roles as policy chair, a two-term president and 10 years as a director, I championed many issues on behalf of the business community, issues that directly affect residents and small business owners. I recently championed the Kelowna chamber’s opposition to the real estate speculation tax and continue to press hard for this tax to be abandoned. When the tax was first announced, the president of UDI Kelowna and I worked together to establish a coalition to oppose the tax. During the spring of 2018, radio and newspapers from the Lower Mainland reached out to ask our opinion as they were not receiving any input or commentary from other local representatives. As mayor, my efforts to convince government not to move forward on this tax will substantially increase and I will ensure Kelowna will be heard. Over the years of my involvement, I have built many strong relationships with both provincial and federal government policy makers and politicians. I have earned the respect and trust required to effect change by leveraging these relationships. As mayor, I will continue to work with all levels of government to enact only policies that are in our best interest. Taxes that hurt the economy, or small business, are not in our best interest. The real estate speculation tax is a policy that negatively impacts small businesses, the trades they employ and Kelowna provincial economies. I am on record for opposing this tax and am working hard with the provincial government to reconsider their position.
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Kelowna city councillor candidates:
The speculation tax is not a benefit to Kelowna. It will impact our tourism and local property investors. I also don’t believe it will help with our homeless problem or our low rental property inventory. The owners of these properties will still want to protect their investments and will just end up paying the tax. If the provincial government wants to tax property owners they should focus their efforts on the foreign buyers and roll out the foreign buyer’s tax province-wide or increase it. This speculation tax is one new tax we do not need in Kelowna.
I believe the speculation tax will have a minimal effect on our city. I understand the rationale for it but the government went about it the wrong way. A tax on property flipping would have been more effective in reducing the speculation on housing instead of penalizing those who have vacation homes in the Okanagan. I have seen the streets of empty houses in Vancouver and read about some of the crazy purchase prices. Those prices have driven up the cost of homes across the country.
Amarjit Singh Lalli
The speculation tax was ushered in without proper consultation. It puts our city at a disadvantage. Housing starts are down 29 per cent. It is doing very little for affordability and is not increasing supply. An increase in supply of homes will keep affordability in check. You need to bring in proper legislation. Identify the problem and take the steps to resolve the issue. The tax needs to be axed and replaced with one that actually resolves the issue of flipping houses.
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The purpose of the proposed Speculation Tax is to increase rental vacancy rates and improve affordability in targeted areas of British Columbia. Any funds derived from our community by means of this tax should be returned to Kelowna for an affordable housing land acquisition strategy. This would enable the city (which isn’t actually responsible for providing housing) the ability to buy land when it is available and advocate for BC Housing to invest in the construction of the buildings. Creating opportunities for the new development of subsidized, and below market, rental housing would greatly benefit our residents who can’t afford current rental rates. It’s important to note that the negative effects of the proposed Speculation Tax are already being realized. I have personally seen three homeowners sell their properties here and reinvest in the U.S. market. Sadly, this new tax is targeted more to vacancy and assets than actual speculation. Notably, many of the properties affected by the proposed taxation would never reach the rental market due to their high value. From a business perspective, the Speculation Tax will discourage investment both from buyers and developers.
The concept of the speculation tax has already had a profound negative impact on our city. This prolonged period of uncertainty has shaken the confidence investors have in Kelowna and has slowed our economy. If the Speculation Tax is to become law, I believe the impact will be far worse. It is important for the public to understand that the announcement of the Speculation Tax (and Kelowna’s inclusion) was made with zero consultation with the City of Kelowna. I take great offence to this, find it disrespectful to our citizens and completely irresponsible. Moreover, I believe the Speculation Tax, if implemented, will not achieve it’s stated intent—to make housing more affordable. Uncertainty thwarts investment. Fewer new builds equal less supply. With less supply being added to the market, housing prices will not fall as proposed. A “pure” speculation tax that penalizes those who choose to flip homes without occupying them or only occupy for a brief period of time should be contemplated, but must be examined closely prior to implementation. It’s very difficult to deal with policy when it has been imposed upon a city without input and consultation. Advocating to sympathetic MLAs (including Green Party leader Andrew Weaver) with vigor must be continued. Good progress was made at (recent) UBCM and some hope was provided in the commentary from Weaver. A defeat of the legislation would remove the cloud of uncertainty that is currently present and allow business leaders to plan for the future with a consistent business horizon.
The speculation tax will have great impact on our city. I believe it has already has had some impact as I have personally heard from potential buyers that they are shy about investing in our city not knowing the full impact of the tax as yet. The tax will not work to increase the supply of viable housing in designated urban centres as the provincial government has stated, and even if and when implemented, the municipalities will not gain any revenue from this source. I am disappointed the government choose certain areas to implement the tax as most of British Columbia has a rental deficiency housing issue and this certainly does not adhere to a fair playing field. There has not been proper or sufficient consultation on this issue and I feel that the premier and the finance minister should have consulted with all the parties concerned before the onset of the announcement. At this point, we must continue to lobby the government to eliminate the speculation tax for British Columbians and Canadian citizens.
The speculation tax will have a negative impact on Kelowna. The speculation tax has created a disadvantage for certain municipalities and has penalized hard-working Canadians who have invested in properties throughout B.C. and who support the local economies where these properties are located. It’s estimated that the greatest majority of owners and buyers who are being penalized are B.C. residents, followed by Canadians from other provinces, with foreign owners and buyers being the smallest percentage of people to be impacted by this tax. I believe it is the mayor and council’s role to lobby the provincial government to take a sober, second look at the implications of the speculation tax and push for its elimination. It’s an ill-conceived tax and should be scrapped altogether. At the very least, Canadians should be exempt from this tax.
The Speculation tax will cool the real estate market in Kelowna. We have already seen that the tax, as proposed, has disrupted the local real estate industry. I have fully supported Mayor Basran in meeting with Green Party leader Andrew Weaver, Minister Selina Robinson and the Premier to request the tax, as proposed, not be implemented in Kelowna. I remain supportive of implementing a true “flipping” tax to discourage investors from selling condos and homes prior to taking ownership. I believe this is the real issue that a speculation tax should address. The Union of B.C. Municipalities has recommend this type of speculation tax and supports it. The UBCM believes it would be far more effective at cooling the real estate market without targeting Canadians that are investing in a recreation home or a retirement home for the future. I share this opinion.
The Speculation tax was a poorly thought our process that has created a disadvantage to our community when it comes to investing here. There is a strong correlation between Westcorp putting the breaks on their development (of a new highrise hotel in downtown Kelowna) and the new Speculation tax.
Our neighbours were from Alberta and they bought a second home in Kelowna and planning to retire here in a year or two. They told us that they had done their budgeting right down to the dollar. When the news came out about the speculation tax they were in shock. A few months later their house (in Kelowna) went up for sale and they now live full-time in Alberta. Nothing they did was speculative. They prudently bought an asset that fit in their five-year plan. The speculation tax will reduce the investment folks make in housing in our city if they are currently out of province—even though they may move here in a year or two. I think we should use the momentum of conversation about this tax to shift the focus into an area where there is consensus and that is in a flipping tax. Where if someone buys a home and flips it before they move in there is a tax. This has brought support and the funds could be used to fund affordable housing initiatives.
I believe the speculation tax, as it is currently proposed by the provincial government, does not meet its intended purpose and, in fact, could have negative consequences on our community. Firstly, it dissuades those who wish to purchase vacation homes or future permanent homes from investing in Kelowna and may redirect them to our outskirts (Lake Country and the electoral areas) as well as induce development outside of our permanent growth boundary. This outcome is inconsistent with sustainable community development and our city’s focus on densifying our urban core. An additional impact is the possible loss or delay of future housing projects as many potential purchasers would incur significantly higher annual taxes payable to the province. I would be supportive of a true speculation tax that targets those who are driving prices through actual speculation and flipping. From my perspective, the best approach at this point is to continue to lobby our provincial government, MLAs and the Green Party leader to modify the legislation to better meet the intended outcomes. Should the tax actually be implemented, I would expect that all proceeds of the annual taxes paid by Kelowna citizens to the province of B.C. be invested directly in affordable housing within the City of Kelowna. I would also expect and lobby the province to annually produce transparent reports declaring dollars collected and expended within our community.
I find irony in the naming of the speculation tax, by definition speculation is both investment in property or other ventures in the hopes of gain but with the risk of loss and also the forming of a theory or conjecture without firm evidence. We should call it what it is, a vacation rental, absentee or vacant owners tax. I feel the theory of the speculation is going to be tested on our community and I believe that big brother politics is willing to do so without appropriate consultation from our municipality. It’s plausible that the tax could work if you built a relationship of trust with the provincial government that the general revenue would be given back to its taxpayers locally using the money optimally. But the strong-arming tactics used here have not convinced me of such. Further to this argument is the exclusion of resort municipalities where tourism-based economy from outside the community is expected and where ownership outside the community is expected and this makes them exempt. Although the tech sector is closely chasing the number one spot in Kelowna for economic impact tourism is still on atop the leaderboard. None of this means I’m ignorant to our unique growing community and its affordability needs. What I believe is we need to empower local government to collect its own levies on vacant homes and to invest the revenues in non-market housing where it deems best suited to its own community. Supporting the speculation tax would be gambling too many uncertainties for Kelowna that could have us making future reactive measures in other areas.
My concern with the speculation tax is that it will drive investment, and, developer interest and confidence away from Kelowna. While the goal of the speculation tax was to cool down the housing market (initially only in the lower mainland), there are significant – potentially unintended – consequences of the speculation tax as it applies to our region. The lower mainland housing market issues and consequent policy solutions are not the best fit for our region. I believe there are other avenues and solutions that need to be explored to make housing affordable and attainable by citizens in all demographics. The policy solutions for our city must be based on the statistics and data which evidence the housing market issues particular to our region. By driving investor confidence from the city, the speculation tax will also drive away those wanting to set up businesses, directly impacting the economic well being of Kelowna. We have worked hard to create a vibrant community, one where investors want to do business. However, I believe that the speculation tax could be a huge economic set back for our city, resulting in a negative ripple effect. As a result, I support the on-going feedback/advocacy provided to the provincial government requesting Kelowna be exempt for this taxation strategy.
(Did not respond: Wayne Carson, Craig Hostland, Gordon Lovegrove, Jeff Piatelli, Mo Rajabally, Stef Van Meeteren, Kevin Bond)
Read their full responses at www.kelownacapnews.com