B.C.’s new tax on foreign buyers of homes has fanned optimism among observers that the resulting fund for affordable housing could help build new rental units to ease the worsening squeeze on Metro Vancouver renters.
Port Moody mayor Mike Clay, the chair of Metro Vancouver’s housing committee, said the 15 per cent foreign buyer tax could generate large amounts of capital for new housing projects, in partnership with Metro’s housing corporation or other agencies.
But he wants the province to keep the money – likely hundreds of millions of dollars a year – within Metro where the foreign property transfer tax is being levied.
“This is a Metro Vancouver tax so I am hopeful that the money will stay in the Metro Vancouver region to help with affordability in our region because that’s where the money is being generated from,” Clay said. “I’m hopeful the province recognizes that and any reinvestment would be tied to the region.”
He said Metro’s housing arm, which owns and manages 50 complexes with 10,000 market and subsidized rental units, has significant opportunities to add density and new units by renovating and expanding older buildings.
And he said a provincial fund could be the key to making that happen as well as creating new projects.
Until now such initiatives have been stymied by a lack of investment dollars and the increasingly astronomical cost of land.
“If cities are able to make land available and the province is able to make capital investments, then we’ve got a pretty good formula there for bringing on a lot of good, affordable rental housing,” Clay said. “And that would be exciting to see if that’s what they could do with the money.”
Rental vacancy rates have fallen below one per cent in both Metro Vancouver and the Fraser Valley over the past year, amid reports of landlords evicting tenants under false pretenses to charge new tenants higher rents.
Fund for B.C. not just Metro
Housing Minister Rich Coleman could not be reached for comment.
But provincial government officials say the Housing Priority Initiatives Fund will not consist of dedicated money from the foreign buyers tax, but rather a yet-to-be-specified portion of the province’s entire property transfer tax revenue.
A finance ministry spokesperson said whatever amount of money the government transfers into the fund could then be used for initiatives anywhere in the province, not just in Metro Vancouver.
That could include a range of housing, rental or shelter programs, initiatives and activities.
The province could augment existing programs such as BC Housing’s rental assistance programs and potentially fund new initiatives that might increase the supply of affordable or rental housing, or support homeownership.
The province has earmarked an initial $75 million for the fund.
The B.C. government raked in $1.5 billion in property transfer tax in 2015. And that was before it created a higher third-tier rate on the most expensive properties earlier this year and before unleashing the foreign buyers tax.
Private landlords ready to partner
David Hutniak, CEO of LandlordBC, said its private sector members would be willing to partner with the province and municipalities to help address a key challenge in building affordable housing: the price of real estate.
LandlordBC members are willing to either enlarge their purpose-built rental buildings to create more units, or tear down buildings near the end of their lives to construct larger buildings with perhaps double the apartments, he said.
“A partnership with us would basically allow them to get more bang for their buck,” Hutniak said. “We could build more units of rental housing more cost-effectively and faster.”
Older rental apartment building in Vancouver. Image: Google Streetview.
He said municipal governments could help by fast-tracking redevelopments, waiving development cost levies and community amenity contributions, allowing increased density and reducing parking requirements.
Hutniak said his organization doesn’t think the new tax should support the construction of new condo high-rises, which might only see a small percentage of its strata units offered for rent.
“What we need is support to build more purpose-built rental,” he said.
Apartment building owners would have an appetite, Hutniak said, to sign a 50- or 60-year agreement with the province and the city in such a collaboration.
Tax has ‘shaken confidence’
Greater Vancouver Home Builders’ Association CEO Bob de Wit is urging the government to use the revenue to help make home purchases more affordable – if the tax proceeds unchanged.
De Wit said he still hopes the government may exempt contracts for deals made prior to Aug. 2 when the tax took effect but that are closing at a later date, triggering the tax.
And he said he’s concerned the foreign buyers’ tax has “shaken the confidence” in many potential investors in B.C. real estate.
The flow of multifamily condos coming onto the market could take a hit, de Wit suggested, because some projects may not go ahead as a result of foreign buyers pulling out of pre-sale commitments and leaving developers too few committed buyers to proceed. In other cases, he said, local buyers downsizing to a condo may pull out because the sale of their house to a foreign buyer collapses.
“That may affect future supply, which is a major concern,” de Wit said.
He said support for rental housing expansion is a national problem that requires a federal fix, ideally a return to the more favourable capital gains tax treatment of the 1970s that encouraged the construction of much of the purpose-built rental housing that exists today.
A resolution from the B.C. Chamber of Commerce urges senior governments to develop tax and other incentives for rental units in the low- to mid-range income levels.
Surrey Board of Trade CEO Anita Huberman said there’s a big gap of affordable housing for skilled workers with mid-range incomes.
She suggested the new fund be used as a carrot to encourage developers to build quality rental stock for mid-income workers earning between $30,000 to $60,000.”
Metro Vancouver has forecast nearly 65,000 new rental units will be needed over the next 10 years.
– with files from Martin van den Hemel