B.C. Green Party tax plan to create affordable housing is 'overkill,' say experts
Two economists say Green party proposals attempt to capture anger on high housing costs
The B.C. Green party says it knows how to cool the market for residential real estate and increase the supply of affordable housing.
It claims it has "the boldest housing plan released by a political party in this election."
But would it work?
Two urban experts interviewed by the CBC election fact check team say it could work a little too well — calling aspects of it "overkill" that could "clobber" the market.
The Greens have proposed a three-pronged assault to drive down real estate prices, pledging to hike the property transfer tax on expensive homes, impose a capital gains tax to penalize "flipping," and implement a province-wide 30-per-cent foreign buyers tax. That is twice as high as the 15-per-cent tax imposed in the Metro Vancouver area last August.
Josh Gordon, an assistant professor at the Centre for Public Policy at Simon Fraser University, believes the Greens are trying to "capture the anger that exists around the housing affordability issue."
"I think there's cooling, and then there's clobbering. And this would be more towards the latter" says Gordon. "Once you include all (taxes), that would be quite a shock to the system."
Tom Davidoff of the Sauder School of Business at the University of British Columbia believes the Green party has some "great ideas," but also worries about the combined effect of the proposed taxes, saying they could have "a serious impact on property values."
Capital gains: what sellers would pay
Currently, when homeowners sell, they don't have to pay capital gains tax on the increase in value of their home as long as it's been their primary residence.
Under the Green Party's plan, you'd have to live in the home for more than five years before selling, otherwise any profit over $750,000 would be subject to capital gains tax. Any profit under that amount would be added to a "lifetime capital gains cap" of $750,000.
The key is the five-year-wait before selling. But Green party leader Andrew Weaver got that wrong during the televised leader's debate on April 26.
"We're addressing people who flip homes" Weaver told the audience. "Our lifetime capital gains does not apply to…someone living in a house for three or four years."
The party's policy says it definitely would apply.
Josh Gordon of SFU says there's a reason for the muddled message.
"The roll out to the policy has been unclear at best, perhaps confused at worst. It's not even clear how it's going to operate, so it's hard to discuss."
Large property tax hike proposed
The Greens are proposing big increases to the property transfer tax (PTT) — paid by buyers — depending on the value of the home.
Currently, the PTT starts at one per cent on the first $200,000 of property value, 2 per cent up to $2 million, and climbing to 3 per cent on any portion over $2 million.
The Greens would introduce a new sliding scale, from zero per cent on properties under $200,000, up to 12 per cent on properties over $3 million.
According to an example provided by the party, a single-family home valued at just over $1.7 million would see its PTT nearly double, from $32,500 to $59,500.
Complicating matters, the Greens say they "still haven't worked out the details" on an additional "speculation property transfer tax."
Again, SFU's Josh Gordon is critical. "I think this is indicative of them making things up on the fly a little bit and tossing out a lot of ideas that have been put forward, but not necessarily well thought through," said Gordon.
Foreign buyers taxed again
Both economists think the Green's third idea — a 30 per cent foreign buyers tax province wide — wouldn't work.
"You should not have a 'one-size-fits-all' taxation," said Davidoff. "If you look at a place like Whistler, or any other resort community, affluent foreign buyers are great for the local economy. If you got rid of the affluent foreign buyer, you might clobber the resort economy."
Gordon said raising the tax wouldn't generate much cash for the province because foreign buyers would just abandon B.C.
"Raising it to 30 per cent seems a bit like overkill. Already, that type of buying has dropped off substantially. So you'd get very little revenue if you raised it that high.
"And I don't think that's the way to go."
Both economists say they have no affiliation with any political party, but have their own idea of what would work to cool B.C.'s real estate market.
Developed at Davidoff's UBC's Sauder school of Business and Gordon's SFU's Centre for Public policy, the plan calls for increased property taxes, with a rebate in income taxes for residents of the province.
That would provide a tax offset for people who live and work in B.C. while foreign buyers not paying income tax here, would get no break.
Gordon says early indications were the Greens were going to embrace that plan, but the party went with its own "scattergun" approach.
"There are some good ideas here," said Gordon. "But some of them are a little too draconian."
With files from Manjula Dufresne and Michelle Ghoussoub