It was inevitable, after a record-breaking year for real estate sales in Metro Vancouver, that January's round of property assessments would trigger demands the government do something about the rising cost of housing.
Assessments have spiked in a number of B.C. communities but in Vancouver, where the average selling price for a single detached home exceeded $2.5-million late in 2015, affordable housing is more of a political phrase than a reality.
Vancouver Mayor Gregor Robertson is calling for new taxes to cool the market and some measures are expected in the next provincial budget on Feb. 16. But the impact of those changes may be limited – in part because the municipal, provincial and federal governments are attacking the problem in different and sometimes counteractive ways.
B.C. Finance Minister Mike de Jong has hinted, strongly, that he is planning an overhaul of the property transfer tax. The province is likely to raise the threshold for tax exemptions – and pay for the change by adding a new, higher tax rate for the most expensive homes.
The changes will likely be modest – he has cautioned that tax relief could simply increase demand in an already-tight market, driving housing prices still higher. And punitive tax hikes could hurt existing homeowners.
"We are not interested in taking steps that will see a diminishment in people's equity, the value of their homes, but we are interested in facilitating entry into the housing market by young families," Mr. de Jong told reporters last fall during a finance briefing.
Meanwhile, the federal government is attacking the issue by making it harder for first-time home buyers in the superheated markets in Toronto and Vancouver to get a mortgage. The primary change, which comes into effect Feb. 15, will double the minimum down payment for insured mortgages to 10 per cent from 5 per cent for the portion of a home's value from $500,000 to $1-million.
Nor have Mr. Robertson and Mr. de Jong agreed on an approach. Mr. Robertson wants a new speculation tax, which the Finance Minister dismisses as a revenue grab.
They have been duelling, through the media, for the past year about the merits of tax changes to make housing more affordable.
The mayor has also challenged the shift away from building subsidized housing by both senior levels of government. "We need the provincial and federal governments to step up," Mr. Robertson stated last week, "both to build new affordable housing, and to keep housing within reach for families on modest and middle-incomes."
Mr. de Jong is vulnerable to complaints that he has moved slowly while the province reaps a windfall from the rising value of real estate sales. At last count, the provincial treasury has raked in $350-million in unanticipated revenue from the property transfer tax, and that figure will be higher before the fiscal year is out. (It took the new federal Finance Minister one week on the job to announce the mortgage changes.)
Helmut Pastrick, chief economist for Central 1 Credit Union, says there is good reason to be cautious.
Establishing a luxury home tax or trying to thwart flipping in real estate with a speculation tax may have a limited effect, and could easily make things worse. "At that high end you are dealing with buyers with considerable income and wealth; its impact might not be as dramatic as one might expect. And I'm not sure it's the luxury end that is driving prices up in Langley, Richmond, Surrey and Burnaby."
The main culprit is simply the balance of supply and demand, he said. Active listings for single family homes have dwindled and Metro Vancouver's confined geography offers little opportunity for new growth. Meanwhile, the economy is relatively strong, and people are moving here because it is an attractive place to live.
The most significant leverage governments have, Mr. Pastrick said, is to work together to steadily build more subsidized housing. And that would not substantially change the market. He predicts housing prices will continue to trend upward in the coming decades. "This is an eternal problem that is not going away, and quite frankly individuals will have to adjust." Owning a single family home in Vancouver will, increasingly, be nothing more than a dream for a growing population of renters.
Justine Hunter