A team of economists have pooled resources to tackle B.C.’s affordable housing crisis.
Professors from UBC and SFU have proposed a new tax in the form of a yearly surcharge on vacant B.C. properties and owners who aren’t paying Canadian taxes.
The proposition by Thomas Davidoff, Joshua Gottlieb, and Tsur Somerville would see revenue from the surcharge funnelled into the B.C. Housing Affordability Fund.
“There’s clearly an affordability issue here – it’s hard for people to find a place they can afford, and it’s becoming a clear policy issue,” Davidoff with UBC’s Sauder School of Business told Vancity Buzz.
“And so the question is, what can we do to make things better?”
The surcharge would be a 1.5% yearly charge based on the value of the home. That means a $10 million home would put $150,000 into the B.C. Housing Affordability Fund.
Davidoff said it makes sense to tax housing and property more than we do income; he described our labour market as “so-so” while referring to our housing market as “phenomenal,” but said making the switch isn’t feasible.
“You’d be changing rules in extreme and while you could make more people better off doing it, it is not a politically easy task.”
“When you think about it, what we proposed is the obvious solution: we asked for more contribution from people who don’t pay income taxes in Canada and don’t rent their house out, and we write a cheque to everybody else,” Davidoff said.
While Davidoff was hesitant to say this tax proposal takes direct aim at foreign investors, he said they will likely be affected by it. He said he doesn’t want foreigners to stop investing in our housing market, he wants them to simply rent out the space they do have rather than leave it vacant.
“I think a lot of the people who pay this tax in percentage terms could be foreign, but foreigners don’t have to pay it. This is more generous than the homeowners exemption, for which you have to be a permanent resident or citizen.”
In terms of how this would affect market value for houses, Davidoff believes it would be a wash. While investors who refuse to rent out their homes might be discouraged from entering the housing market, Vancouver would become more attractive overall for people who want to live and work here.
“That was something the Liberals asked for on any policy, which is no effect on housing prices, but do something for affordability, and we’ve solved it.”
“What has been proposed to date is to give money to existing homeowners and people wealthy enough to buy a house and people who can’t afford to buy a house get nothing. Not only do they get nothing, but you actually hand them with an income tax bill,” said Davidoff.
He said cutting the property tax bill would increase the deficit, leading to raising income tax to make up the whole, essentially increasing taxes just on renters, something Davidoff calls a “ridiculous joke.”
Based on current data, Davidoff and his team claim the BCHAF could raise upwards of $90 million a year in Vancouver alone.