Written for Daily Hive Urbanized by Geoff Costeloe, a practicing lawyer and entrepreneur in Vancouver.
While increasing numbers of young professionals are finding homeownership out of reach, the BC government continues to quietly double down on programs that benefit homeowners at the expense of renters and younger taxpayers.
Housing prices have been top of the news more than ever recently, and have long been a topic of conversations. There is no doubt of a massive generational buying gap. With wannabe homebuyers looking at prices that are seven times larger than household income nationwide (and 12x in Vancouver), its safe to say that young professionals without significant family help or a winning lottery ticket are priced out of the market.
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This should be an obvious concern for municipalities, who will inevitably see smart, young professionals, tradespeople and entrepreneurs flee to more affordable communities, draining future taxpayers from cities struggling to balance budgets. To date, the focus has been on the consequences of that change on family formation and the creation of a large cohort of underhoused families (despite them having “good” income by national standards).
The gap only grows as a result of low interest rates, allowing those with available equity (homeowners) to borrow money and finance purchases, start businesses and make other income-earning investments, putting their house equity to work for them. Renters don’t have the same economic opportunities as they don’t have collateral that banks will accept to provide credit.
While the above situation is largely unavoidable in a low interest world, the BC government continues to quietly double down on programs that benefit homeowners at the expense of non-homeowning taxpayers.
If you think getting an interest rate of 2% for a mortgage from a big bank is cheap, the BC government is happy to give you one at 0.45% – if you are an existing homeowner. Available to all British Columbia’s over 55 years old, the Property Tax Deferment Program allows owners to delay payment of their property taxes until the eventual sale of the property whether through a sale or their death. The purpose of such a program is to make sure that homeowners on a fixed income or pension don’t get priced out of their home as a result of increasing property taxes as their property gains value.
While the goal of the program is noble, the fine print should outrage non-homeowners and should be immediately examined by the governing NDP, who claim to be on the side of the “little guy.” How much can a rate of 0.45% save you over a lifetime? For a $1.5 million home over a 30-year period, and assuming no increases in property taxes during that time, the sweetheart rate of 0.45% saves homeowners $17,200. Inevitable tax increases will only increase that number. It may seem like a small amount, but multiply it by hundreds of thousands of homes across BC and the magnitude to the lending is revealed.
Why does this matter? The Deferment Program is subject to no means test, no income thresholds, no qualifications, and no maximum. In other words, anyone who can apply, should apply. They can use the money not spent on property taxes for a variety of reasons; pay down debt on their mortgage, add to their investment portfolio, or even purchase a second home for rental income to help children.
The purpose of the Deferment Program is completely valid. There is a real need to make sure homeowners are not forced to sell their family home because of rapidly increasing prices creating potentially unaffordable property taxes. But the provincial government and municipalities should not be subsidizing loans to some of the wealthiest homeowners in our province, further cementing the increasingly aristocratic nature of property ownership in BC.
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