The BC government first introduced the tax in 2018. Currently, each vacant home owner will pay 0.5 percent of their property’s assessed value under the tax, with the tax rising to 2 percent for foreign homeowners. The tax applies to most municipalities in the Lower Mainland and southern Vancouver Island, as well as Kelowna, West Kelowna, Nanaimo and the Lantzville district. Now, the provincial government says it will expand it to Lions Bay and Squamish, as well as the Vancouver Island communities of North Cowichan, Duncan, Ladysmith and Lake Cowichan. “People in these communities have spoken. They’ve spoken about the intense housing pressures they’re facing, including foreclosures and near-zero vacancy rates,” BC Finance Minister Selina Robinson said Wednesday. “This expansion will help prevent profiteering from moving from one community to another within an area.” Robinson called affordable housing a “generational challenge” and said the speculation tax is working as intended to bring homes back into rental supply. “Speculation and the vacancy tax turned thousands of vacant units into homes,” he said. “It reduced speculation and kept prices lower than they would have been without the tax.” Commissioned Report by the BC government in June shows that the Speculation and Vacancy Tax (SVTA) impacted Vancouver homeowners, bringing about 18,000 new apartment units to the rental market from 2018 to 2020. The tax changes take effect from January 2023. The government says residents of the six additional municipalities will have to declare their additional properties in January 2024. The province says 99 per cent of British Columbians are not subject to the tax. In addition, there are many exceptions in booksincluding primary residences and residences with long-term tenants.
“A tool in the toolbox”
The profit tax is a unique type of tax in BC. — a provincial tax that applies only to residents of certain municipalities. The province has said it aims to target urban areas with near-zero vacancy rates with the tax to help with affordability struggles. When asked by reporters why the tax was not extended to other areas — such as Whistler and Gulf Islands — Robinson said some areas had “unique challenges.” “We’re watching this very closely and we’re gradually looking at how best to use this tax,” he said. “This is one tool in the toolbox … we will continue to monitor how things develop in the holiday areas.” In a statement, BC Green Party MLA Adam Olsen said he was disappointed the Southern Gulf Islands were not included in the tax extension and would ask Robinson why that wasn’t the case.
More nonprofit housing needed, economist says
Alex Hemingway, senior economist at the Canadian Center for Policy Alternatives, said expanding the profit tax was a logical step for the province. “There would be a strong case to expand anywhere where we’re seeing this kind of shortage of rental housing, rising rents and low vacancy rates,” he told CBC News. Hemingway said so foreign buyer’s tax and the profit tax should be accompanied by funding for more non-profit housing and incentives for municipalities to zone for more affordable housing. “We need to unpack this full toolkit and start building as much housing as we can in this province with it, with an emphasis on public and not-for-profit housing,” he said. Another fiscal step the province could take to ease the housing crisis, according to Hemingway, is to expand the property tax structure. Economist Alex Hemingway says the province could consider extending the profit tax to all communities experiencing housing problems. (David Horemans/CBC) Currently, residential properties worth more than $3 million are taxed two percent beyond the value of the property. “[The government] it should broaden the reach,” he said. “So that it is not imposed only on individual properties separately, but also on the total value of the property belonging to any particular owner. “We could progressively tax the big landowners in the province who have enjoyed huge increases in land wealth over the past two decades.”
