British Columbia

B.C. home builders applaud HST transition rules

Home builders and renovators in B.C. are applauding the provincial government's move to reverse the harmonized sales tax.

Controversial tax was rejected during referendum last summer

Home builders and renovators in B.C. are applauding the provincial government's move to reverse the harmonized sales tax.

On Friday, Finance Minister Kevin Falcon unveiled a series of HST relief measures he said gives home buyers and builders a more solid foundation to transition out of the controversial tax, which voters rejected last summer.

Falcon said the government will officially return to the seven per cent provincial sales tax by April 1, 2013.

He said starting April 1, 2012, the government will raise the HST rebate threshold for new home buyers to $850,000, up from the current $525,000, meaning more than 90 per cent of newly built homes will now be eligible for a provincial HST rebate of up to $42,500.

After the HST end date, those who buy a home built before April 1, 2013, will pay a two per cent transition tax on the full house price, he said.

Phil Hochstein, president of the Independent Contractors and Builders Association of B.C., said the HST changes are well thought out and are "definitely worth the wait."

"This is the kind of thing that deals with housing affordability and I think throughout the province it will help kick start the housing industry and people involved in construction," he said.

Business picking up

Urban Development Institute executive director Maureen Enser said the changes provide certainty to both home buyers and builders.

B.C. home builders and renovators expect business will pick up after the HST disappears in 2013. (Associated Press)

"At the very least, the industry was expecting clarity on the HST transition rules and how this might affect pre-sale agreements," she said in a statement. "The government's announcement today has gone much farther and is a strong reflection of the economic importance of B.C.'s development sector."

Todd Senft with Revision Custom Home Renovations in Vancouver says the new rules could mean good news for the home renovation business.

"I think that the PST-GST system now coming into play may have those people that were sitting on the fence before all of a sudden say, 'Hey…let's start thinking seriously about that renovation again,'" he said.

Senft expects business will pick up during the transitional year, but the real push will come when the HST actually disappears.

"Yes, and I think being prepared for that is going to be a challenge as well in not knowing what to expect and hopefully being able to anticipate how many people are sitting on the fence," he said.

Senft said the relief measure are good news for the home-renovation business.

"Obviously it sparks the economy because construction is — and home renovation and new home construction — is one of the biggest drivers in the economy."

Tax relief

However, Peter Simpson with the Greater Vancouver Homebuilders' Association says homeowners might hold off on renovations if the government doesn't announce more changes.

"The renovation industry is still concerned that people will wait until the HST is over with before they make those major decisions."

To avoid taxes, Simpson said, some homeowners pay in cash, fuelling an an unsafe underground industry. He is calling on the province to bring in tax relief for renovators.

"In the meantime, we need to have some sort of tax rebate or tax credit and what this will do is homeowners will see the light and do everything above board," he said.

The HST, a blending of the PST and the five per cent federal goods and services tax, was announced by then-premier Gordon Campbell and his then-finance minister Colin Hansen shortly after the 2009 election.

Anger over the implementation of the tax set off a province-wide referendum, and the tax was voted down last year.

The B.C. government announced last month that it had worked out an agreement to pay back the $1.6 billion the federal government paid to the province in transition money.

While the province has to pay all the money back, it's getting an $118-million break on interest and will be able to repay the money in instalments over five years.

With files from The Canadian Press