Staff Report to Council - Speculation Tax Exemption

Staff Report

to
Council

Date:

April 3, 2018

Department:

Planning

Subject:

Speculation Tax Exemption

Background

The Province of British Columbia has implemented a Speculation Tax as a means of deterring investors from purchasing property with the intent of making a quick profit. The tax will apply in the Metro Vancouver Regional District (excluding Bowen Island and Electoral Area A, except the part of the electoral area that is the UBC and University Endowment Lands), the Capital Regional District (excluding the Gulf Islands and Juan de Fuca), Kelowna-West Kelowna, Nanaimo-Lantzville (excluding Protection Island), Abbotsford, Chilliwack, and Mission. The tax is administered outside the property tax system and property tax cycle, and requires non-resident homeowners to pay a yearly tax on the assessed value of their homes. The intent of the tax is to temper speculation in the housing market and encourage homeowners to add their vacant properties to the province’s rental housing stock.

Commentary

Many BC homeowners will be excluded from this tax via three identified exemptions:

• Exemptions for principal residences;
• Exemptions for qualifying long-term rental properties; and
• Exemptions for certain special cases.

However, the new Speculation Tax will negatively impact long-term, non-resident owners who are not speculating in the housing market but rather purchase property with the intention of moving to Langford once they retire. If you’re flipping a house or condo within a short period of purchase, you’ll only be liable for the new tax within that short period. Whereas long-term, non-resident owners who are not speculating on the housing market – they simply own the home – will have to pay that same tax year after year. Renting these properties may not always be feasible or desirable as owners may want to use their property at various times of the year, and the level of taxation may act as a deterrent for purchasing property in the first place. Not only will this impact the costs of residential development in Langford, it may ultimately be passed onto tenants and home buyers, further impacting affordability.

The City of Langford has made housing affordability a priority by reducing bureaucratic barriers at the municipal level through innovative zoning regulations and a fast-tracked permitting system. The implementation of this tax will negatively impact the City of Langford’s economy, revenue, and tax income, and work against continued efforts to develop more affordable housing market.

In addition, the tax may have limited impact on addressing speculative purchases in the form of property flipping. The proposed tax is based on an annual assessment and is not based on a true speculation transfer tax. The short term nature of such speculation holdings (via property resales or ‘flips’) may limit the tax’s intended consequences. Conversely, a tax based on annual assessment encourages property speculators to flip the property sooner to avoid the ongoing tax that does not address the market distortion caused by property flipping. In essence, the Speculation Tax appears to act more like vacant homes tax (which is not a problem in Langford) rather than its intended purpose of addressing speculation in the marketplace.

While the intended target of the tax is urban centres facing a housing affordability crisis, communities across B.C. with housing prices far exceeding the median value of homes in Langford (e.g. Squamish, Whistler, Lake Country, Bowen Island) are specifically excluded. This suggests the need for the Province to consider, through local consultation, an economic assessment of the potential unintended impacts of the proposed Speculation Tax.

OPTIONS

Option 1

That Council:

1. Support the issuance of a letter to the Provincial Ministry of Finance requesting that the Speculation Tax not include the City of Langford;

AND

2. Ask the Mayor write a letter on behalf of the City of Langford to the Minister of Finance and Premier expressing concerns over this tax and that this report and Motion be submitted with the letter;

AND

3. Ask the Mayor write a letter on behalf of the City of Langford to the Capital Regional District (CRD) requesting that the entire CRD be excluded from the Speculation Tax and that the Province consider allowing individual municipalities within the CRD to opt-in or opt-out of the tax on a case-by-case basis;

OR Option 2

4. Take no further action with regard to requesting an exemption from the Speculation Tax.

Respectfully submitted,

Submitted by:
David Sametz, Planning and Subdivision Technician

Concurrence:
Matthew Baldwin, MCIP, RPP Director of Planning

Concurrence:
Michelle Mahovlich, P.Eng, P.Geo, Director of Engineering

Concurrence:
Audrey Kryklywyi, Deputy Director of Finance

Concurrence:
Braden Hutchins, Director of Corporate Services

Concurrence:
Darren Kiedyk, Chief Administrative Officer

:ds