Finance Minister Carole James announced the BC NDP Government’s budget yesterday and delivered on a wide variety of promises from its election platform. The key initiatives were centered around housing speculation.
The provincial government released a 30-point plan addressing housing affordability in the province.
Highlights from the plan include:
• The introduction of a two per cent speculation tax (0.5 per cent for 2018, two per cent in 2019 onwards). The tax will be charged annually on the property’s assessed value. Despite the name, this appears to be an absentee / vacant home tax. Details are not yet final, but it appears the tax would be levied to foreign and domestic investors who do not pay tax in B.C. Principal residences and long-term rentals would be exempted.
• Increase to the Foreign Buyer’s Tax (FBT) from 15 per cent to 20 per cent. Until now, the FBT only applied to home sales in Metro Vancouver; however, the NDP will extend this to other parts of the province including the Fraser Valley, Central Okanagan, Capital Regional District and Nanaimo.
• The Property Transfer Tax on sales of homes worth more than three million dollars will increase from three per cent to five per cent.
• Increase the School Tax on homes worth more than three million dollars.
• Elimination of the BC Homeowner & Equity Partnership. Applications will be accepted until March 31, 2018.
• Moving to stop tax evasion on pre-sale condo reassignments. The government will require developers to collect and report information about the assignment of the pre-sale condo purchase.
• Taking action to end hidden ownership (homes owned through trusts and numbered companies).
• Expanding benefits to low-income families and seniors living independently. The 2018 budget will increase benefits under the Renter Assistance Program (RAP) and Shelter Aid for Elderly Renters (SAFER) programs.
• Empowering home owners in Stratas to deal with short-term rentals. The budget will allow strata corporations to increase fines for homeowners who ignore short-term rental rules.
• Various measures to ensure proper enforcement and coordination with tax authorities on the above changes.
The full 30-point plan can be read here.
The past few months has seen an increase in mortgage lending rates, the introduction of a stress-test in mortgage lending criteria, and now measures to curb housing speculation in BC. These are all headwinds for housing prices in Vancouver, and, in theory, should have a cooling effect on future price movements. However, the local market has been resilient to changes made in the past few years and only time will tell if these new rules will have an impact.
Of course, housing was not the only issue addressed in the budget. Below is a summary of other key announcements:
• Affordable childcare. The NDP did not deliver on its $10 a day childcare election promise. However, they did introduce a new child care program that makes care effectively free for families with income below $45,000 and offers subsidies for families with income of between $45,000 – $111,000.
• The elimination of Medical Services Plan premiums by 2020 to be replaced by a payroll health tax for businesses. The payroll tax will apply to businesses with payroll in excess of $500,000. The rate will be tiered from $500,000 to $1,500,000 and top out at 1.95 per cent for businesses with payroll over $1.5 million.
• Increase in the BC Carbon Tax to $5 per tonne per year, adding $212 million a year.
• An increase in tobacco tax from 24.7 cents per cigarette to 27.5 cents.
• The luxury surtax on vehicles worth more than $150,000 will increase from 10 per cent to 20 per cent.
• Free disability transit passes, a freeze on B.C Ferries fares for major routes (with reduced fares 15 per cent for minor routes), health care improvements, more teacher hires and boosts to skilled trades training.
For 2018, the government is projecting a $151 million surplus. Interestingly, there’s a new line that wasn’t in previous budgets. It’s called “surplus before ICBC impacts”, and it shows a projected $903 million surplus for next year — but also a projected $1.076 billion loss from ICBC.
The fiscal state of ICBC has been well documented in recent weeks. Attorney General David Eby announced a variety of reforms earlier this month, such as caps on pain and suffering for minor injuries. The government estimates these reforms will save ICBC $392 million this year, but concedes that there’s no way of knowing to what extent the reforms will influence drivers and trial lawyers.
The full 157-page budget can be viewed here