Waters: Myopic speculation tax could bring down more than house prices

Unintended consequences of the new tax could affect other parts of Kelowna, West Kelowna economies

If the province’s new speculation tax was actually a tax on speculation and not property, it would have raised a fortune in revenue by now just in Kelowna and West Kelowna.

That’s because the level of worry about just what the tax will do to the local housing market—and by extension a number of other sectors in both cities—is skyrocketing.

Both cities have their municipal staffs hard at work trying to figure out what the actual impact of the new tax will be on their respective civic economies. Kelowna’s mayor is worried about “unintended” consequences of the tax, while his West Kelowna counterpart knows the tax is bad news, but just how bad he’s yet to find out.

The tax, announced in the recent B.C. budget, is aimed at trying to make housing more affordable and accessible in the province’s red hot property markets of the Lower Mainland, the Fraser Valley, the Victoria and Nanaimo areas and, strangely, only Kelowna and West Kelowna in the B.C. Interior.

It slaps a tax levy of $5 per $1,000 of assessed value onto property owned by everyone living outside of B.C.—Canadians and foreigners alike—this year, and raises it to $20 per $1,000 of assessed value next year. Principal residences and long-term rentals are exempt.

But the tax appears to be a case of the provincial government not seeing the forest for the trees. In its desire to tackle what has become, for many, a housing crisis in B.C, it has failed to see the bigger picture consequences as it penalizes other Canadians for investing in this province.

The worry by the tax’s opponents is it will slow down purchasing, which in turn will lead to less construction and then spiral into a loss of construction jobs. That, along with fewer people wanting to come here, will impact on other sectors such as tourism, a life-blood of small business in the Central Okanagan.

And then there’s the question of why just Kelowna and West Kelowna in the Interior. Lake Country is just next door and is one of the fastest growing municipalities in the province. It also has some of the highest housing prices in the Central Okanagan. But it was left out of the tax’s greedy grip. So was Peachland. So was Penticton. So was Vernon. So was Kamloops…

The speculation tax may have the desired effect in the end. It may help bring down prices. But at what cost? In the case of Kelowna and West Kelowna, if it does brings down the cost of housing but people lose their jobs and still can’t afford the housing that’s on the market—albeit cheaper than it was before—are we any farther ahead?

If Victoria wants to tax folks from outside of the country for buying B.C. property that’s one thing. But don’t penalize other Canadians—the majority of buyers here—for spending their money in the Central Okanagan.

Alistair Waters is the assistant editor of the Capital News.

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