The speculation tax is going to slam the door shut on outside hustlers who are gaming real estate out of reach of young families, fund more home-building and produce a $200-million pool of revenue for social housing.
Alternatively, it’s going to hang a “closed for business” sign on the province that will spark an economic recession and stand as a profound insult to other Canadians.
Those are the opposing views after the legislation imposing the tax was finally introduced last week, eight months after it was first outlined.
But after a deal between the NDP and the Green Party that produced some amendments just two days after it was introduced, there’s a third potential outcome.
What if the speculation tax doesn’t do anything at all?
The current version up for debate is such a pale shadow of what was suggested, there’s the possibility that its net impact will amount to almost nothing. The eight months of prep work between the announcement and the amended bill look like a steady retreat from the initial burst of determination to make as big a splash as possible.
The initial rhetoric was about bold, significant new measures never attempted before in Canada. But that shifted to continual reassurances about minimizing the impact on B.C. taxpayers.
Finance Minister Carole James’ main point now is that 99 per cent of British Columbians won’t be affected at all.
The stance has changed from dramatic interventions in the market toward moderating and scaling back.
The first vague outline in the February budget was of a new annual tax on vacant homes in prime areas, aimed mostly at outsiders. At two per cent of assessed value, it would have amounted to a huge new annual bill on people who own vacant homes, even with exemptions for B.C. citizens.
In a matter of weeks, the scaling back started. The five key regions covered were refined and reduced. The rate was cut for Canadians outside B.C. and reduced some more for British Columbians. Tax credits for B.C. citizens provided more protection.
In May, James provided an estimate of how many homes would be taxed. It was 32,000, of which 20,000 were owned by B.C. citizens.
The question is whether a new tax on 32,000 of the two million homes in B.C. is going to make a difference.
The idea is to prompt owners to rent them out, or sell them to people looking for permanent homes. But a share of them are high-end homes that owners wouldn’t consider renting, or rustic cabins that wouldn’t fit the rental market.
The number of prime-target homes the government seems to be aiming at — empty condos in the five overheated markets — is some fraction of 32,000. And every modification to the tax reduces the impetus to sell or rent them out.
Many can escape the speculation tax. Others are presumably wealthy enough to pay the premium and carry on.
This week, it got watered down again. Concerned about B.C. Green caucus opposition to the tax, James struck a deal with Green leader Andrew Weaver.
Three amendments from the Green Party were accepted. The main one cuts the rate on Canadians outside of B.C. to a half per cent, from one per cent. So all Canadian owners of vacant homes will be taxed at the same rate, although British Columbians will have other exemptions.
This move will cut $30 million in expected revenue, and further reduce the pressure to do something with those vacant units.
Foreign owners of 12,000 vacant homes will still pay the full two per cent tax. The question is whether it will make much difference.
Just So You Know: The arguments will rage in the house about whether it’s a disaster in the making or a great idea. Other arguments will take place offstage.
Greens initially wanted municipalities to have the right to opt out of the tax, but the NDP wouldn’t budge on that.
So one of the amendments is a compromise — the mayors who oppose the tax will get a guaranteed meeting once a year with the finance minister where they can yell at James about the tax.