The BC government announced on Tuesday it has introduced legislation to tackle speculation around residential real estate in the province.
“We believe the people who live and work in BC should be able to afford a place to call home,” said BC’s finance minister, Carole James. “We’re tackling this housing crisis head-on and the speculation and vacancy tax is an essential piece in our plan.”
The tax which was mentioned during the unveiling of the government’s provincial budget earlier this year, is the first legislation of its kind to be introduced in the country.
According to the province, the legislation means that BC will have the strongest protections in Canada against people looking to use the housing market as a resting place for both foreign capital and other speculative investments. It will also ensure satellite families and people who use local services without paying BC income taxes contribute their fair share.
The tax includes exemptions for British Columbians’ principal residences, rented properties, and special circumstances including major home renovations and difficult life events such as divorce. The legislation also has exemptions in place to broadly protect the development of land to support the province’s growing housing supply.
The majority of revenue raised by the tax will come from non-residents of British Columbia, including foreign owners and satellite families. Over 99% of all British Columbians will be exempt from the tax. Exemptions include provisions for principal residences, rented properties and special circumstances, such home renovations and for significant hardship.
All revenue raised from the speculation and vacancy tax will be used to fund affordable housing for people who live in BC. Further, the tax will help boost the province’s rental supply by introducing incentives to make vacant homes available for rent.
For 2018, the tax will be levied at 0.5% of the property’s assessed value for all properties subject to the tax. In 2019, the tax will be levied at 2% for foreign investors and satellite families, 1% for Canadian citizens and permanent residents who are not resident in British Columbia for income tax purposes (and not members of a satellite family); and 0.5% for British Columbians who are Canadian citizens or permanent residents (and not members of a satellite family).
The government said that by levying the highest tax rate on foreign owners and satellite families, the tax “targets people with limited social and economic ties to the province.”
Where the tax applies
The government said the following areas are subject to the speculation and vacancy tax:
- Municipalities within the Capital Regional District
- Municipalities within Metro Vancouver – excluding Bowen Island, the Village of Lions Bay and Electoral Area A, but including the University of British Columbia and the University Endowment Lands
- City of Abbotsford
- City of Chilliwack
- District of Mission
- City of Kelowna
- City of West Kelowna
- City of Nanaimo
- District of Lantzville
Who is a foreign owner?
The BC government has defined a foreign owner as an individual who is not a Canadian citizen or permanent resident of Canada. Provincial nominees under the Provincial Nominee Program are deemed to be BC residents in the year they become a provincial nominee and in the following year.