Federal government touts Chinese investment while B.C. government discourages it
Canada’s federal government recently announced that it’s embarking on a campaign to increase investment and migration from China. In particular, Immigration Minister John McCallum (pictured above) said that the government wishes to attract “the cream of the crop,” helping bolster growing sectors such as tech. Among the places one would expect to be most receptive to these efforts is Vancouver, an aspiring global tech hub and magnet for newcomers from the world over.
Unfortunately, some B.C. government policies are at odds with their ambitions to grow the province’s tech sector. For example, the government recently introduced a property transfer tax on foreign homebuyers in Metro Vancouver, in hopes of controlling the rapid rise in home prices. This move not only misses the root of Vancouver’s affordability woes, but provides a barrier to Canada’s objective of attracting talent and investment. In order to promote B.C. as a place to do business, its economy needs to be more open, not more closed.
The federal government is right to underline the importance of foreign investment. Indeed, Vancouver, as a port city and Canada’s gateway to the Pacific, has flourished thanks to trade, immigration and investment capital from the rest of the country and abroad. Of course, like many other highly desirable, productive urban regions—from London to Silicon Valley—affordability has declined precipitously in Vancouver, spurring the decision to impose the tax. However, this move not only misses the point—that the housing supply is not growing as quickly as demand—but it sets a dangerous precedent by not grandfathering in home sales agreed to prior to the tax’s announcement.
It isn’t just the federal government that recognizes the importance of foreign investment and attracting highly skilled immigrants. B.C. Minister of Finance Mike de Jong— the very same finance minister that introduced the tax on foreign buyers—has suggested that “singling out foreign investment for a punitive tax” might undo some of the work the province has done to attract people and investment to the region. Fifteen per cent of the price of a home in Vancouver is a large burden for someone moving to Vancouver for work. That sends the wrong signal to the type of young, talented workers that cutting-edge firms seek to attract.
Rather than thwarting investment, Canadian governments should capitalize on the demand for housing in Canada. As a liberal democracy with a strong tradition of rule of law, people and businesses from around the world seek to move to and invest in Canada. That’s a big opportunity that Canada cannot afford to lose due to restrictive housing policies in our largest cities.
Instead, as highlighted in a recent Fraser Institute study, local and provincial governments need to reduce barriers that prevent the supply of new housing units from keeping up with demand.
Canada cannot be simultaneously open and closed for investment—the left foot should not trip over the right. Policymakers should seek to harness investments in Canada, while removing roadblocks that lead to problems such as unaffordable housing. Canada’s precarious economy can ill afford to chase away investment.
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