A tax intended to curb B.C. real estate speculation and push homeowners to rent out their empty properties has so far generated $115-million, with foreign owners and satellite families accounting for two-thirds of such taxpayers, according to the province.
That figure includes $58-million from the 2018 calendar year and $57-million from the first quarter of 2019, when the rate for owners living outside of Canada and those who pay little to no income tax in British Columbia quadrupled to 2 per cent, according to data released by the B.C. government on Thursday.
Finance Minister Carole James said the first-year declarations show that the tax is working as the government had intended.
“It is in fact targeting speculators, people living outside of B.C.,” she said, adding that 99.8 per cent of British Columbians are exempt from paying the tax.
“It is also helping to encourage homes to be used to house people – not to be used for speculation, not to be used to create challenges in our communities."
As of Sept. 3, 11,783 homeowners in B.C. are paying the tax, according to the government. This includes 4,621 foreign owners, 3,060 satellite families, 1,519 Canadians living outside of B.C., 2,362 B.C. residents and 221 others, such as properties held through corporations and trusts.
An estimated 17,000 people still have not completed their declarations.
The government says that the tax is contributing to the “ongoing moderation” in B.C.’s housing market, including a 5.6-per-cent decline in home-sale prices based on the first three months of 2019, although there is no data to definitively link the two.
Ms. James said the tax is only a piece of the government’s 30-point housing plan aimed at improving affordability and creating more rental homes.
“One measure is not going to fix the crisis that was left us, but a combination of measures … is having an impact,” she said.
Thomas Davidoff, an associate professor at the University of B.C.’s Sauder School of Business, said the net effect on revenue is unclear, but that the tax does appear to have raised revenue and likely led some homeowners to sell or rent out their properties.
“I think it’s reasonable to conclude that it has had the effects that were desired,” he said.
The government estimates that the tax will generate $185-million in each of the 2019-20 and 2020-21 years; Mr. Davidoff said it can be expected that that figure will decrease over time.
“You have to think the behavioural response will take some time to adapt,” he said. “The only counter to that is that they might get better with enforcement, especially with satellite families.”
Some municipalities have criticized the tax, saying it has created uncertainty and hindered new construction. Homeowners have also expressed frustration with having to apply for exemptions every year.
“We have locally elected mayors telling John Horgan that the speculation tax is not working in their communities and that it is reducing the construction of new and affordable homes for families,” B.C. Liberal finance co-critic Shirley Bond said in a statement.
Ms. James, who on Thursday met with mayors of municipalities where the tax applies, said she will be collecting feedback and any changes that may be needed will be looked at in the fall.
The update in B.C. came on the same day that Prime Minister Justin Trudeau pledged to implement a federal levy of 1 per cent to curb foreign speculation.
“One of the knock-on effects of the B.C. initiative is that that has pushed capital to other parts of the country where there isn’t that modest speculation tax,” he told reporters in Victoria. “That is why we feel it is important to create a national measure right across the country based on B.C.’s success with it to ensure that foreign speculation doesn’t make housing less affordable for Canadians who, as we know, are looking for places to live.”
With a report from Michelle Zilio in Victoria
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Andrea Woo