Kelowna latest municipality to raise the alarm about ‘damaging’ B.C. speculation tax
Speculation tax backlash spreads
Jennifer Saltman
The Province
The provincial government’s controversial real estate speculation tax is facing increasing opposition as elected officials in affected municipalities and regions across B.C. field hundreds of angry calls flowing in from a broad swath of affected individuals and groups such as the construction industry and developers.
Local politicians across the province are reacting by appealing to the NDP government to exempt their regions — or cancel the tax outright — because it has such significant unintended consequences that it could cause what some term a “potential financial crisis.”
“We know that there are serious issues in our community and we want to work with the provincial government to help rectify this situation, but we don’t think the speculation tax as proposed will necessarily have the positive impact and, in fact, could potentially have some very serious negative impacts,” said Kelowna Mayor Colin Basran.
The speculation tax was announced in last month’s provincial budget and will apply to any homeowners in six specific regions who don’t live in a property or rent it out long term. They will be taxed $5 per $1,000 of assessed value for 2018, increasing to $20 per $1,000 of assessed value in 2019.
The areas affected are the Metro Vancouver, Fraser Valley, Capital and Nanaimo regional districts, along with the municipalities of Kelowna and West Kelowna.
A non-refundable tax credit will be available to help offset the tax for B.C. residents, but in many cases it will not cover the full amount of the tax.
Basran said Kelowna is not happy with the tax in its current form, which will operate more like a vacant home tax and won’t be as effective as a “flipping” tax aimed directly at those who buy and quickly sell properties.
Basran said he is hearing “in droves” from Albertans who own vacation homes in Kelowna that they see the speculation tax as a warning from the province that they shouldn’t be spending their money in his city.
“They’re taking real offence to this on the heels of the oil and wine dispute,” he said. “They feel this is an indication from our provincial government that they are not welcome in this province.”
As more information has emerged about the tax, Basran said British Columbians who own homes in the area are contacting him as well.
Another concern is the impact on the construction industry. Basran said there are two projects worth a total of about $300 million — one has been approved by council and one is going through the approval process — that could be in jeopardy because the developers have said they will put them on hold until the tax is clarified.
“More than anything, it’s the uncertainty that’s raising a lot of concerns and is damaging our economy, because when people don’t know, they’ll just sit and wait, and that’s not a good thing,” he said.
A staff report will be presented at Monday’s council meeting, and after it is received council will take an official position on the tax and decide on its next steps.
Basran’s comments come after the District of West Kelowna and the Regional District of Nanaimo, two of the six areas covered by the speculation tax, told the province that they want to be exempted or see the tax cancelled altogether.
On Tuesday, West Kelowna voted for the mayor to meet with Premier John Horgan and B.C. Green party leader Andrew Weaver to put pressure on the province to exclude West Kelowna from the tax.
“We’re very concerned about the overall economic impact,” said Mayor Doug Findlater. “We are fundamentally concerned this would push property values below the amount of equity people have in their homes. It’s a potential financial crisis.”
The Kelowna Chamber of Commerce and Greater Westside Board of Trade have asked that both Kelowna and West Kelowna be exempted from the tax.
Last week, the Regional District of Nanaimo board sent a letter to Finance Minister Carole James that said it appreciates the province’s goal of addressing the cost of housing in B.C., but pointed out that the speculation tax has unintended consequences that outweigh the benefits.
James said that the government is listening to communities across the province, but also read out notes in the legislature from people who are struggling to find housing. She did not commit to exemptions, saying instead that the government is working on the specific details of the tax, which will be out within months.
Those consequences include taxing recreation properties — some of which are in zones that prohibit year-round residence — penalizing those who are buying retirement properties a few years in advance, unfairly applying the tax to Nanaimo but not its neighbouring regional districts, and a lack of clarity about what will happen in homes with secondary suites.
On Tuesday, the Nanaimo board unanimously objected to the tax in any form, in any region or municipality in B.C.
“It should be eliminated altogether,” said board chair Bill Veenhof.
The board of the Capital Regional District — which covers southern Vancouver Island, from the Juan de Fuca Electoral Area to the Southern Gulf Islands, including Victoria — has not come out with a consensus position on the speculation tax.
However, the directors of two electoral areas included in the Capital Regional District said they are asking the province for exemptions.
Mike Hicks, the Capital Regional District director for the Juan de Fuca Electoral Area, is most concerned about the community of Port Renfrew. He said the Albertans and British Columbians who own vacation homes in the area bring in important tourist dollars and pay taxes that support services such as the volunteer fire department.
Hicks said the province’s speculation tax will cripple the area.
“We have a beautiful little economy going,” he said. “I feel that Port Renfrew is just on its feet and really rocking and doing really well, and this is going to be devastating.”
Hicks said he feels that the province is attempting to curb prices in the Victoria area, but has mistakenly applied the tax to rural areas. Horgan is his MLA, and he doesn’t believe that the intention is to hurt places like Port Renfrew.
“I’ve expressed my thoughts to him and have asked for an exemption for the Juan de Fuca Electoral Area from this tax for those reasons,” he said.
Wayne McIntyre, director of the Salt Spring Island Electoral Area, said he has written to his MLA, Adam Olsen, about having his area exempted from the tax, and expects the Southern Gulf Islands Electoral Area to ask for the same.
“We’re really rural communities,” McIntyre said. “We’re entirely different from the urban environment, and yet for a lot of the programs that exist we’re considered urban simply because of our relationship with the Capital Regional District.”
Metro Vancouver board of directors chair Greg Moore said the speculation tax has not been discussed at the regional district board.
A request for comment from the Fraser Valley Regional District did not receive a response.
On Thursday, Liberal MLA Michelle Stilwell, who represents Parksville-Qualicum, said in the legislature that the tax is causing chaos in her community and asked James if she would accede to requests from communities, like Nanaimo Regional District, that want to be exempted from the speculation tax.
Liberal MLA Ben Stewart, whose represents Kelowna West, called the tax “half baked” and asked whether there would be an exemption for West Kelowna.
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