Is the Speculation Tax working? Depends who you ask. - The Orca

Is the Speculation Tax working? Depends who you ask.

Rob Shaw 2

Rob Shaw: The NDP point to foreign-owned properties being sold or rented out. Others point to a still-overheated housing market, and the fact that British Columbians are now the biggest targets.

New data on B.C.’s speculation tax continues to fuel debate over whether the tax is one of the most effective pieces of housing legislation in recent memory, or a bungled bit of populist policy that keeps getting worse with time.

Which version you believe probably has something to do with the party you voted for in the last election.

And unfortunately, the new numbers are unlikely to change the minds of most partisans.

The data showed British Columbians are now the largest group of people paying the province’s speculation tax. More locals with second condos and homes are getting dinged by the spec tax than foreign owners, other Canadians or satellite families.

That’s a huge shift from when the tax started in 2018 and was dominated by wealthy foreign owners who purchased properties (mainly condos in Metro Vancouver) and left them vacant as investments to flip in the future.

Part of this is excellent news for the New Democrat government.

The speculation tax appears to have scared away foreign owners of vacant properties, with their numbers dropping 48.9 per cent in the second year of the new fees.

Almost 3,500 vacant, foreign-owned, properties have been sold or rented in the first two years of the speculation tax.

That’s a remarkable achievement, one the NDP could trumpet if it wanted to. Yet those figures were nowhere to be found in the government’s press release.

Instead, they were buried halfway through a technical briefing document quietly linked at the bottom of the media release under the “learn more” section.

That’s likely because the success of the speculation tax in driving out foreign owners of vacant properties is a double-edged sword.

Once foreigners aren’t around to blame for that particular pressure on the still-unaffordable housing market, the uncomfortable reality begins to set in that perhaps British Columbians are the real speculators and vacant landlords after all.

No government wants to touch that one.

It’s one thing to blame foreign buyers and try to tax them. Both the previous BC Liberal government, and the current NDP government, have been only too happy to go that route.

It’s another thing altogether to target local voters, especially in Metro Vancouver, where the bulk of the vacant properties sit.

That leaves the NDP government with a choice: Declare victory and scrap the tax, or carry on and risk voters realizing the speculation tax is slowly turning into a wealth tax on those financially successful enough to own a second home?

Wealthy property owners have never been traditional New Democrat supporters.

It was an easy choice for Premier John Horgan when asked on Thursday.

“It’s an avoidable tax,” he said.

“This is something if you don’t want to pay it there are mechanisms in the marketplace you can avail yourself of – you can sell the property to someone who wants to live in it, or you can rent it out to someone looking for a place to live.”

Horgan said an “overwhelming number of British Columbians support this tax” and reiterated that 99 per cent of them don’t actually pay it.

It’s one thing to blame foreign buyers and try to tax them. It’s another thing altogether to target local voters, especially in Metro Vancouver, where the bulk of the vacant properties sit.

He also brushed aside the idea that the $88 million in revenue generated in 2019 is important, even though it’s likely money a future B.C. government may need one day in the distant post-pandemic future as it seeks to rebalance its budget.

“It was not designed to be a revenue driver, it was designed to be a housing initiative,” he said.

“And I think it’s been successful.”

Backstopping the premier are the NDP partisans who’ve proven highly effective in framing the online debate about the speculation tax as a kind of class warfare.

If you are wealthy enough to own a second property, you deserve to pay an extra tax, they argue – even if the government initially said British Columbians wouldn’t be penalized by the speculation tax, and even if targeting locals with second homes wasn’t the stated rationale for the tax in the first place.

If you still think that’s unfair, then here’s a social media dogpile of people who make lower incomes than you who’d be happy to take your house and pay your taxes.

That defence is working for the NDP. For now.

But as B.C.’s housing market continues to ramp up to new record levels of prices and sales, it’s going to be increasingly difficult for Horgan to argue that the speculation tax is having any real impact on housing prices or rental vacancies, which were the main reasons for its creation in 2017.

Even Monday’s press release was a stretch.

“The tax has contributed to the ongoing moderation of the housing market and has not negatively impacted housing supply,” it read.

That was directly contradicted by the Ministry of Finance’s own financial update in December, which showed home sales and average prices in November reached levels not seen since 2016 when the B.C. housing market was so red hot that the then-NDP opposition was demanding immediate government intervention.

That defence is working for the NDP. For now.

There is no “moderation” occurring in B.C.’s housing prices at all, and certainly not because of the speculation tax.

The jury is still out, however, on the rental market. It’s possible the speculation tax did create new rental units that otherwise wouldn’t have been available. Rents in Victoria and Vancouver continue to trend upward, not downward. And the overall vacancy rate has not improved by any meaningful amount.

If the government intends to defend the tax for the long-haul, it’s going to have to find more tangible benefits to highlight within a red-hot market that shows no signs of cooling.

All this is to say: We haven’t heard the last of the speculation tax.

Oh, and check your mailboxes. Government starts mailing this year’s declaration forms next week.

Rob Shaw has spent more than 13 years covering BC politics, now reporting for CHEK News and writing for The Orca. He is the co-author of the national best-selling book A Matter of Confidence, and a regular guest on CBC Radio.