VANCOUVER—Measures introduced in British Columbia’s provincial budget aimed at tempering Metro Vancouver’s red-hot real-estate market miss the mark when it comes to the underlying factors fuelling the housing crisis, say experts.
B.C. Finance Minister Mike de Jong unveiled the province’s fourth consecutive surplus budget on Tuesday, which bumped up the exemption level for the property-transfer tax on newly built homes to $750,000. The exemption will be funded by a one per cent tax increase on the value of a home sale above $2 million.
“We want to be cautious about any solutions that are going to have the effect of reducing the value of the homes (people) are already in … at the same time as we deliver lower costs for people trying to get into the market,” Premier Christy Clark said Wednesday as she outlined the delicate balancing act faced by the provincial government.
“The housing market poses really complex issues but I think we’ve begun to solve some of them.”
But housing experts are disputing the effectiveness of her government’s approach.
Tom Davidoff from the University of British Columbia’s Sauder School of Business dismissed the newly announced tactics as “ill-thought-out, kind-of-nothing proposals.”
He attributed the region’s skyrocketing housing prices to a perfect storm of a shaky global economic market where people are looking for a safe place to stash their money, and conditions making Metro Vancouver extremely attractive to foreign buyers.
Those include the province’s “bargain-basement” property taxes, as well as a market where demand is growing and supply isn’t, meaning that earnings come from rising housing prices and not rent.
“It’s the perfect market for capital to hang out in,” he said—one of the reasons prices have continued to rise while the loonie drops in value.
“We’re rolling out the red carpet for people who want to park cash, which just doesn’t work to make for a productive economy.”
He also called it a non-starter when it comes to attracting young, innovative talent.
Paul Kershaw, a real-estate expert and founder of the young-Canadian’s advocacy group Generation Squeeze, said B.C. has the worst-performing economy in the country for young Canadians, taking aim at the premier’s claims about the province being Canada’s economic leader.
“Housing affordability isn’t a problem in a couple of Vancouver neighbourhoods. Housing has become unaffordable for young people just in general,” he said.
Kershaw said he would have liked to see the province introduce a tax on housing wealth, both to raise revenue and curb the rise in housing prices.
He also proposed charging capital-gains tax on the sale of principal residences, a move he said would treat the housing market less as a speculative investment opportunity and more for its primary purpose of providing shelter.
Kershaw approved of the government’s announcement to dedicate $355 million over five years to create 2,000 affordable-housing units, but likened it the to a “drop in the bucket.”
Tony Roy, head of the B.C. Non-Profit Housing Association, lauded that investment as “fantastic,” but raised concerns over its adequacy.
“Overall, (it’s) transformational in terms of what it’s going to do for the capacity of our sector but a far cry from what is needed.”
He said B.C. needs 5,000 subsidized units per year, with 3,000 in the Lower Mainland.