In February the B.C. provincial government moved to ban the construction of so-called mega-mansions on provincial farmland, which critics say became a problem as a direct result of B.C.’s foreign-homebuyer tax.
“This new law will encourage farming and better protect farmland by banning mega-mansions,” said Lana Popham, minister of agriculture, in a press release. “It’s a great step in our effort to revitalize the Agricultural Land Reserve so that British Columbians can count on a safe, secure supply of locally grown food on their tables for years to come.”
But real estate agents who specialize in farms and rural resorts claim the tax handicaps landowners who want to sell their property because their residences are subject to the tax. They also say that the tax discourages foreign buyers who have been keen investors in rural B.C. properties.
The BC Liberal government introduced the foreign-buyer tax in 2016, and the current BC NDP government raised the tax from 15 per cent of a home’s value to 20 per cent in its 2018 provincial budget.
The move, mostly meant to target buyers of homes in Metro Vancouver, had negative and untended consequences, according to Richmond FarmWatch.
The advocacy group claims a typical Richmond farmland was worth about $378,000 per acre in 2016 before the foreign-buyer tax came into effect, based on BC Assessment data. Now the same type of property sells for more than $1.1 million per acre.
In December, the City of Richmond voted to limit new homes on ALR land to 4,300 square feet, while provincial legislation reduces the maximum size to 5,400 square feet.
But foreign homebuyers attempting to avoid the tax by buying farmland will find that it stills take a big bite.
According to the B.C. Ministry of Finance, the foreign-buyer tax applies to:
Property BC Assessment classifies as farmland that includes a residential improvement, such as a building used as a farmer’s home. The additional tax is paid on the value of the residential improvement, plus 0.5 hectares (1.2 acres) of land.
Property BC Assessment classifies as commercial that includes a residential improvement, such as a condo in a building with commercial space. The additional tax is paid on the value of the residential improvement.
In one example provided by Richmond FarmWatch, a farmland mega-mansion built in Richmond before the size limit was reduced drove up the assessed value of the 26.6-acre lot it sits on to $8.3 million from $88,000.
Farms have also apparently been erased since the foreign-buyer tax was introduced, Richmond FarmWatch contends.
Based on 2017 assessments, 56 B.C. properties that used to have farm designation switched to purely residential use. In comparison, Richmond FarmWatch said, only 22 farms gave up their farm designations over a five-year period between 2011 and 2016.
But real estate agent and farmland specialist Freddy Marks said the tax on foreign buyers is negatively affecting “hard-working, tax-paying citizens of British Columbia” because it reduces the potential value of their rural property.
“What the new tax has managed to accomplish is cause a rapidly escalating agricultural farmland crisis, and it has ruined many Interior and northern British Columbians’ exit strategy for retirement,” said Marks, of Agassiz-based Sutton Showplace Realty.
“Foreign investment has always played a key role in purchasing many of these profitable businesses. Many foreigners have now reconsidered their investment into B.C.,” Marks added in a statement sent to Western Investor.
– With files from Western Investor and Richmond News