Following more than a year of intense public discussions about housing affordability, senior governments have made significant policy shifts in recent weeks. And more is expected in November when, after months of consultations all across the country, the federal government is expected to announce its National Housing Strategy. For now, here's an overview of BCREA's responses to actions taken to date
BC Foreign Buyers' Tax (FBT)
On August 2, the BC Government implemented a 15 per cent Property Transfer Tax (PTT) on foreign buyers and corporations buying homes in the Greater Vancouver Regional District. The tax was imposed after only a few weeks of collecting buyers' residency data, and applied to transactions where contracts had already been signed. By regulation, the government can expand the FBT to other geographical areas, and change it so the rate of tax is anywhere from 10 to 20 per cent.
Intended as a way to cool the market, the FBT was delivered when the number of sales was already in decline. More time is needed to determine the FBT's impact on the market, though some home sales have collapsed as a direct result. Sellers often need to sell their current homes in order to buy different homes. Therefore, if foreign buyers can't complete their transactions because of the added expense of the FBT, British Columbians trying to sell their homes are negatively impacted.
To maintain confidence and stability in the market, BCREA, the Real Estate Board of Greater Vancouver and the Fraser Valley Real Estate Board urged the government to exempt transactions that were already underway. Unfortunately, that recommendation was not implemented.
In BCREA's submission to the Select Standing Committee on Finance and Government Services, the Association repeats its expectation that future changes to the PTT will not impact sales in progress. BCREA also asks the government to invest in a broad array of homebuyers by increasing the 2 per cent PTT threshold to $525,000 from $200,000 and indexing all thresholds associated with the tax. Read the submission.
Historic Investment in Affordable Housing
On September 19, the provincial government announced that $500 million would be invested in affordable rental housing in BC, to create 2,900 affordable rental units across BC. The money for this initiative is available through the new Housing Priority Initiatives program, which is largely funded by the FBT.
The units will include a mix of options, including new construction, to meet the needs of a wide variety of people all over BC. The provincial government has committed to identifying and approving all of the projects by March 2017, with new construction being complete within 36 months.
BCREA's pleased with this initiative. Although the Association doesn't agree with all of the government's actions during the last few months regarding the real estate sector, these rental units will have a meaningful impact for many citizens. In a letter addressed to Premier Christy Clark, BCREA urged the government to take quick action and offered the assistance of REALTORS® to provide insight as the program is implemented.
Changes for Government-Backed Mortgages
On October 3, the Government of Canada announced significant changes to regulations for new government-backed insured mortgages. Effective October 17, 2016, all insured homebuyers will have to qualify at the posted five-year rate.
In response to this announcement, BCREA's Economics Team has compiled a Market Intelligence Report,Millennials Bear Brunt of Fed Policy Changes, concluding the new rules could cause the sharpest drop in low-equity homebuyers' purchasing power in years. With housing affordability a critical issue, chopping millennials' purchasing power by as much as 20 per cent will only exacerbate a well-known problem. To read the report and learn more, click here.