B.C. budget—housing plan anything but ‘comprehensive’
The B.C. government’s 2018 budget was widely expected to include measures aimed at housing affordability in the province’s most expensive real estate markets. Unfortunately, the measures announced continue to target the symptoms rather than addressing the root causes. While Finance Minister Carole James (pictured above) said the government’s housing plan will be “comprehensive,” it focuses primarily on the “demand” side of the market while largely ignoring supply constraints, which help fuel higher home prices.
For example, the budget pledges to raise the additional property transfer tax on foreign buyers to 20 per cent, and introduce a two per cent “speculation tax”—without clearly defining speculation—in hopes of “reducing foreign demand, and curbing speculation in the residential property market.”
Not only is it unclear that taxing non-resident buyers has significantly impacted home prices, but it’s also not clear that demand-side policies can do much to limit cost increases in growing metropolitan areas, especially if the supply of new housing does not keep up with demand.
Indeed, B.C. is a growing province, adding tens of thousands of people every year. These people have also experienced rising average incomes and historically low mortgage interest rates, placing enormous pressure on the housing market to respond with new homebuilding. Without a marked increase in new homes, B.C.’s most in-demand cities will continue to see rising prices and dwindling rental vacancies—regardless of the rate non-residents are taxed.
Unfortunately, in the government’s budget, beyond lip service about the need to “speed up approvals” for new homebuilding, and increased spending on social housing, there was no mention of any serious efforts to increase the supply of market housing, the hundreds of thousands of homes caught in red tape at city halls across the Lower Mainland, nor the market mechanisms that make housing affordable for the vast majority of income-earners.
Clearly, the B.C. government has opted for politically expedient actions rather than long-term solutions to the province’s fundamental market imbalance. Until there’s meaningful action to significantly increase the supply of new homes, the government’s plans to address housing affordability for most citizens will be anything but comprehensive.