Real estate industry casts doubt on B.C.'s housing affordability plan
'We don't see it having any positive impact on affordability,' says Urban Development Institute CEO
When the provincial government pitched its sweeping housing measures in the B.C. budget this week, it was in the name of affordability.
But the plan has left some in the real estate industry questioning whether it will make housing affordable at all.
"We don't see it having any positive impact on affordability — in fact, it could drive prices up," said Anne McMullin, president and CEO of the Urban Development Institute, which represents B.C.'s real estate development industry.
She pointed first to the increase in the property transfer tax — from three to five per cent — for homes worth more than $3 million, calling it detrimental to the ability to create affordable housing.
"When you're increasing the taxes on the ability to buy land to develop, that can slow down supply because of the high cost. And when you slow down supply, prices go up."
Penalizing the wrong people?
The province's new speculation tax is also drawing criticism.
It will apply to foreign and domestic homeowners who do not pay income tax in B.C., focusing on those who leave their properties vacant.
By 2019, the tax rate will be two per cent of the assessed value and expand to properties not only in the Lower Mainland, but also Victoria, Nanaimo and Kelowna.
"Will it have an impact on the Kelowna real estate market? Yes, it could," said McMullin. "Will that subsequently have an impact on the Okanagan economy? Yes, it could."
She explained about 15 per cent of sales in that city are from people in Alberta purchasing recreational properties.
"I don't think by curbing the sale of homes to people in Alberta who want to vacation in Kelowna addresses the Lower Mainland's housing affordability issue."
More supply, more quickly. It's not a new idea, but it's one that is being emphasized again by both developers and realtors.
"When supply is constrained, prices go up, the economy is hampered, and people have fewer opportunities to get into the housing market," said McMullin.
"We've done nothing but focus on the demand side over the last number of years: the empty homes tax, the foreign buyers tax, the luxury tax, the mortgage stress test — now we're heaping even more taxes on top of those."
On Wednesday, NDP Finance Minister Carole James defended her approach to attempting to lower housing costs.
She told reporters the goal is to moderate demand and create more supply, adding it's important that people can afford to live where they work.
But Cameron Muir, chief economist with the B.C. Real Estate Association, says a critical issue that still needs to be addressed is the time lag on getting new supply to the market.
"In areas such as Vancouver where just about everything being built is multi-family, it takes five to seven years from conception to completion of a project."
Muir also questioned the expanded foreign buyers tax, which is increasing from 15 to 20 per cent, and extending to regions outside Metro Vancouver to include the Fraser Valley, Victoria, Nanaimo and the Central Okanagan.
He argues only 0.3 per cent of home sale in Kelowna in 2017 were foreign transactions.
"Even eliminating all foreign buyer transactions in these markets is not going to make a difference to the overall price of homes," said Muir.