June 5, 2015
The below letter from President J. Darcy McLeod was sent to our media contacts this afternoon.
Will more taxes solve housing affordability challenges? History says no and so do we....
The rising cost of homes in our region is well-documented. Metro Vancouver home prices have increased nearly 80 per cent since 2005. Detached home prices have increased over 100 per cent.
We worry about how our children can afford a home and how the most vulnerable among us can find basic shelter. These concerns have led to public debate about possible solutions.
One suggestion is for government to introduce new taxes. Some believe government should tax non-Canadian investors who buy properties. Mayor Robertson believes there should be a "luxury housing" tax on the sale of the most expensive homes in Vancouver.
We believe more taxes won’t help. Taxes bring unintended consequences. There’s little to no evidence that a luxury or foreign buyer tax would make homes more affordable.
History tells us that taxes like this fail to have the desired impact and succeed in permanently adding to government coffers.
In 1987, the provincial government implemented what was advertised as a “wealth tax”. It was supposed to apply to the sale of the most expensive five per cent of homes sold in BC. It's been 28 years since that tax was introduced and the thresholds have never been adjusted for inflation.
Today, that tax is known as the Property Transfer Tax (PTT). It’s applied to 95 per cent of all residential property sales in the province. This tax makes housing less affordable.
The home is where many people’s financial net worth resides. It's one of the last major assets that residents can sell and not pay a tax on the revenue. A little mentioned fact is that we already have tax disincentives for foreign owners. If a foreign home owner wants to sell a property in Canada, they are unable to receive a capital gains exemption.
The picture of affordability and home ownership is changing in Metro Vancouver. Our region's affordability challenges are complicated and, unfortunately, there isn't a single action that can solve them. Economists will tell you that offshore investment is a factor in today’s market. To what extent, no one has the data to know.
What we do know is that local conditions have a much more significant impact. We live in one of the most beautiful, progressive and prosperous areas of the world. There are more people who want to live here than there are homes available. This causes prices to rise.
The natural solution would be to create more supply, but we're constrained by mountains to the north, an ocean to the west, and a border to the south.
Despite the headlines, the majority of home sales in Metro Vancouver are not $1-million and beyond. Based on our Multiple Listing Service (MLS) statistics, nearly 70 per cent of all sales in the region last year were below $800,000.
The price of condominiums today ranges between $200,000 and $600,000 depending on size and location. Townhomes range between $300,000 and $800,000 in the region.
Detached homes in the City of Vancouver are at the high-end of our market. Recent activity has pushed homes on the Vancouver Westside above $2.5 million.
It’s a different story in neighbouring communities. The benchmark price of a detached home in Maple Ridge today is $499,100; in Ladner the benchmark price is $713,200; in Coquitlam the benchmark price is $845,400.
Affordability challenges exist. But there are also more options and aspects to the story than is typically discussed in the media. Certainly more than the mayor is putting forward.
J. Darcy McLeod
President of the Real Estate Board of Greater Vancouver