Vancouver Mayor Gregor Robertson wants the province to add another step to the Property Transfer Tax to hit luxury homes harder when they change hands.
That request and other potential proposals to discourage home-flipping and absentee ownership are contained in a May 22 letter to Premier Christy Clark released this week.
The Property Transfer Tax now charges one per cent on the first $200,000 in property value when a home sells and two per cent after that. It currently adds up to $19,000 on the sale of a $1-million house, and generates more than $900 million a year for the provincial government, flowing into general revenue.
Robertson wants a higher transfer tax “on the most expensive properties” – he didn’t specify how much higher or at what threshold it should kick in – with the proceeds of the high-end increment instead earmarked for affordable housing investment.
He said housing should not be treated “solely as an investment commodity” for the world’s wealthiest citizens, who park their money in Vancouver houses and may leave them empty.
He said rapidly rising prices “are creating despair” among middle-income people with good jobs who struggle to find quality rentals and “who are not even within shouting distance of being able to buy.”
Besides Property Transfer Tax reform, Robertson proposes undefined tax measures to discourage quick resales by flippers to reduce speculation.
He also proposes the province give cities the power to “track property ownership and ensure timely occupancy of vacant units.”
“These measures would help moderate the excesses of the Vancouver housing market, without unfairly punishing those who have built up home equity through hard work and personal savings,” Robertson said.
He said the policies would slow surging prices that threaten Vancouver’s ability to keep and attract “the best and brightest” and would “send a signal that our housing is for living in, not for investor speculation.”
Finance Minister Mike de Jong has pledged to study options to address home affordability but with care to avoid reducing the equity existing residents have in their homes.
Clark as recently as February was talking about eventually phasing out the Property Transfer Tax, not increasing it.
Realtor associations have previously urged the province to lift the two per cent threshold to $525,000 so homes worth less than that are charged only one per cent.
Higher PTT would punish farmers: Realtor
Jorda Maisey, president of the Fraser Valley Real Estate Board, said raising the PTT to punish Vancouver speculators could have severe unintended impacts on residents further afield, such as Fraser Valley farmers and other owners of larger acreages counting on tapping their property’s value to fund retirement.
“Our farmers are already having problems with the cost of farming and this could penalize them further,” Maisey said.
“Our concern is just bringing in another tax isn’t going to solve the problem [of speculators.] These people will just look at it as another cost of doing business.”
She said Vancouver-area property pressures don’t exist to nearly the same degree in the Fraser Valley.
Maisey also said the absentee owners of Vancouver condos that Robertson worries about are in many instances more local than some people think.
“It’s not all people from overseas,” she said, adding knows many Valley residents who own a second home in downtown Vancouver.
“They live in the Valley and they like to go into the city and spend time if they’re going to the theatre and not worry about having to come home.”
The benchmark price of detached houses in Greater Vancouver hit $1.1 million in May, up 14.1 per cent from a year earlier. Apartments were up 4.6 per cent from a year ago to $396,900.
In the Fraser Valley, the benchmark house prices were up 6.5 per cent from a year ago to $603,100. Apartments there were actually down 2.8 per cent from May 2014 to $192,500 last month.
House prices have risen the fastest over longer periods of time and in areas closest to Vancouver, where benchmark houses now top $2.5 million on the west side, more than five times the nearly $500,000 price in Maple Ridge.
Encourage small homes not monster mansions: Stewart
Coquitlam Mayor Richard Stewart, who chairs Metro Vancouver’s housing committee, said he’s unsure if tax changes are justified, noting the home owner grant is already a mechanism that effectively makes high-end homes pay more property tax than modest ones.
He agrees more work is needed to foster rental housing construction.
And he said cities should also do more to spur developers to build smaller homes, rather than the monster mansions that have been most lucrative as prices of higher end real estate climbed rapidly.
Stewart said too many quarter-acre lots in Metro suburbs are being built as huge 5,000-square foot houses, when four more modest houses could fit on the same lot as a bareland strata.
“I want us to explore ways to pursue both carrots and sticks to disincent the mansion in our communities,” he said. “Not prohibit it, but make it so it’s not the only profitable form of housing the builder can build and and to improve the profitability of some of the other forms were trying to advocate.”
Smaller homes around 1,400 square feet are more in keeping with the needs of a family, Stewart said, adding the higher density that results can help repopulate local schools and better support public transit.