Return to all Blog postings

BC Business Matters:
BCBC Blog

Jock Finlayson >>

BC Election Series: Housing Affordability, Supply and Related Tax Policy Issues

This is the third in a series of policy staff blogs on the platforms released by the three main parties contesting the current BC election: the BC Liberals, the NDP, and the Greens.

For a cross-platform comparison of the three parties' election commitments, check out our summary document.

 

Blog 3: Housing Affordability, Supply and Related Tax Policy Issues

By Jock Finlayson and Ken Peacock

Real estate, home prices, rental units and affordability figure prominently in all three party platforms.  Each party has developed a substantial narrative around housing/housing affordability, with each platform proposing several housing-related policy measures or new/revised programs.

All three parties promise more funding to expand the supply of rental, co-op, and low income housing across the province.  The NDP platform signals an intention to build 114,000 affordable rental, non-profit, co-op and owner purchase housing units through partnerships over 10 years.  This is a big spending item that is not explicitly costed in their platform.  Based on the Liberal commitments and the Greens’ plan (discussed below), per unit funding would likely be in the range of $150,000 to $185,000.[1]  With no costing provided for this promise in the NDP’s platform, it is impossible to say what the overall financial impact on government would be.  However, if the per unit cost for the government ends up being in the vicinity of $175,000, then 114,000 units would require as much as $20 billion in new spending over 10 years. 

Of course, the actual amount allocated by the government would depend on the mix, location and provincial government funding share under any partnership arrangements that are established. If the plan is to aim for more modest financial contributions from the province, then the annual cost of this proposal could be closer to $1 billion, rather than $2 billion.  The NDP platform does have an unspecified provision for an additional $1.4 billion in annual capital spending.  With the hefty cost of building additional affordable housing not itemized in the NDP’s plan, presumably at least a portion of the additional capital spending is intended to pay for some or all of the party’s rental housing plan – at this stage we don’t know.  

The NDP platform, however, also makes capital commitments to replace old hospitals, build new schools in Surrey and Coquitlam and to fund 40% of the capital costs of the multi-billion dollar Mayor’s Council plan for transit infrastructure in Metro Vancouver.  If the NDP’s share of partnership funding is similar to other affordable housing projects undertaken by the province in recent years, then housing construction will absorb all of the incremental capital funding and more.  Even if they plan on contributing a significantly smaller share of the costs for adding more rental units, there will still be little funding available for other capital projects mentioned in the NDP’s platform. 

For their part, the Greens pledge an extra $750 million per year to support the construction of 4,000 affordable housing units per year (this translates into a per unit cost of $185,500).[2]  Most of this looks to be funded, as the platform allocates $620 million annually from an expanded overall capital budget to finance the construction of additional units.  

Most of the Liberals’ commitments are in place and are essentially reiterated in the platform.  The Liberal government previously earmarked $355 million over five years to support construction of 2,000 affordable housing units.  Another $500 million to create 2,900 rental units in partnership with local governments and other agencies was announced in the fall of 2016.  This funding flows from the Housing Priority Special Account, and was covered in the 2017 Budget.  In advance of Budget 2017, the Liberals added another $65 million over two years to help meet the housing needs of people with mental health and substance use issues.  The Liberal platform restates the $920 million the government has committed to fund the construction of a total of 5,300 affordable rental and social housing units.  Construction will take place over the next few years, but the majority of the costs are covered in the existing budgetary framework. 

Housing Supply, Costs & Taxes

The NDP’s platform is mainly concerned with renters.  It does not include proposals to assist first time home buyers or help families purchase a home.  Instead, the New Democrats intend to expand the supply of rental units.  If elected, the NDP will provide a refundable renter’s rebate of $400 per household per year.  They also plan to pass legislation requiring ‘fair treatment [of renters] during renovations and demolitions of rental properties.” Looking to further reduce the role of foreign home buyers and speculators, the NDP would introduce a 2% absentee owner speculators’ tax, which is projected to raise $200 million a year.  Here, it is worth noting that the Liberal government recently passed legislation giving the City of Vancouver authority to levy and administer a tax on vacant homes. 

Additional tax on residential real estate is a substantial source of extra revenue for the Greens, based on the party’s platform.  They call for a property transfer tax to discourage speculation and flipping.  The Greens would increase the foreign buyers’ tax to 30% (from 15%) and have it apply all across BC, rather than just in Metro Vancouver.  Capital gains in excess of $750,000 on principal residences would also be taxed by a Green government (currently, there is zero capital gains tax on principal residences, regardless of value).  However, a footnote in the Greens’ platform indicates this would only be for properties held for less than five years, which in effect means it would only apply to the high end of the residential real estate market.  Affecting all property owners, the Greens favour a sliding scale for the Property Transfer Tax (PTT), ranging from 0% for properties valued below $200,000 to 12% for those over $3 million.  The Greens would also impose a value-based annual property surtax, with some provisions for offsets for owners who pay Canadian/BC income tax.  Combined, the Greens’ plan projects an additional $500 million in annual revenue collected from new and expanded taxes on residential housing and real estate transactions. 

In broad terms, the Liberals plan to address affordability through a combination of measures to curb demand from foreign buyers, programs to help first-time home buyers, and funding to increase the supply of rental and co-op housing.  Most of the Liberals’ housing-related initiatives were previously announced and have been incorporated into the fiscal framework outlined in Budget 2017. 

One significant Liberal promise (unveiled in Budget 2017) is the BC Home Partnership program, which allots $700 million over three years to assist first time buyers with mortgage down payments.  The program provides interest-free loans up to $37,500 for an estimated 42,000 first-time buyers.    

The Liberals’ platform contains a few new measures targeting supply or improvements to the existing housing stock.  Building on the BC Home Renovation Tax Credit, which assists seniors with the cost of renovations to increase accessibility, the Liberals pledge to double the credit to $20,000 and expand its application to apply to anyone doing renovations to accommodate a secondary suite.  They have also committed to working with municipalities to speed up permitting for residential development.

While there are some areas of overlap, in broad terms the three parties take somewhat different approaches to addressing the issue of housing affordability.  The Liberals have implemented measures aimed at tempering price increases, allocated some funding to increase the supply of rental and low-income housing, and launched a program to assist those seeking to get into the housing market.  The NDP puts a much higher priority on renters, with direct support and aggressive plans to expand rental and low-income housing.  The Greens envisage generating significantly more revenue from housing-related taxes and then using a hefty portion of this to boost the supply of rental units.



[1] The Liberals have committed $500 million to build 2,900 units in partnership arrangements with local governments and other agencies. This works out to provincial funding of approximately $172,000 per unit.  A specific project constructing 80 affordable housing units in Richmond received $12 million in funding from the province and $8 million from the City.  With this arrangement, the province’s per unit funding is $150,000.

[2] Note that the NDP proposes to build nearly three times as many affordable housing units each year, which suggests annual spending will likely be more than $1 billion.